State Street Corp. has had heavy inflows into its target date funds as interest in a packaged retirement product has increased.
The Boston company's Target Retirement Strategy funds, launched in January 2005 and managed by State Street Global Advisors Inc., have increased their assets under management to $3.5 billion as of June 30, from $183 million in June 2005.
Target date, or life cycle, funds are designed for defined-contribution plans and become more conservative as an investor approaches retirement.
Analysts said the funds are popular with investors who want to set their investment strategy and forget it. Participants choose a fund that matures closest to their retirement. The funds are designed to eliminate the confusion investors feel when faced with numerous fund options in a 401(k) plan. The mix of cash, bonds, and stocks in each fund is based on the years until retirement.
Pentegra Retirement Services of White Plains, N.Y., said Monday that it has added State Street's target date funds to the array of funds available in its defined-contribution plans.
Gwen Burrough, the chief marketing officer for Pentegra, said that target date funds have gained popularity because they are simple and well diversified.
Pentegra, which oversees the retirement programs of more than 500 community banks and other businesses, selected State Street's funds because they carry lower charges than other target date funds, Ms. Burrough said.
Several companies have launched or relaunched such funds. Northern Trust Corp. of Chicago introduced a family of target date funds this month. Northern Trust Global Investments manages the funds, which mature at five-year intervals from 2010 through 2050. They include stocks and bonds and alternative investments such as global real estate and commodities.
BlackRock Inc. of New York introduced a family of nine life cycle funds in June. The BlackRock Lifecycle Prepared Portfolios also have maturity dates ranging from 2010 through 2050.
Wells Fargo & Co. reopened the Wells Fargo Target Date Funds to investors in June of last year. In the past 14 months assets under management in those funds have grown 50%, to $1.6 billion.
The San Francisco company originally launched the funds in 1994, and they have grown more popular since the Pension Protection Act was signed into law last year and employers have started to use them as an automatic enrollment option in 401(k) plans.
"The design of the target date funds is very much appreciated by institutional investors," Laurie B. Nordquist, an executive vice president for Wells Fargo's institutional trust services unit in Minneapolis, said in an interview last week. "I think we are going to see a lot of cash flow into these products, because people are beginning to put all of their dollars into one packaged product."
