PGIM, the wholly owned subsidiary of Prudential Financial, Inc., has announced plans to enhance its suite of target date funds (TDFs) with an aim to better serve shareholders, including helping defined contribution (DC) plan participants achieve successful retirement outcomes.
According to the firm’s Oct. 10 announcement, the primary enhancements to the suite of mutual funds and collective investment trusts (CITs) include lowering the net expense ratio for the target date mutual funds from 0.40% to 0.25%. In addition, the expense ratio for the institutional share class of the CITs is expected to drop from 0.34% to 0.19%.[1]
PGIM also plans to replace select underlying actively managed equity strategies with passively managed equity strategies. This move, the announcement notes, allows PGIM to offer a “thoughtful blend” of active and passive management to keep investment expenses low, while providing the ability to add value and mitigate risks with active management.
While the currently branded Prudential Day One Funds will be renamed the PGIM Target Date Funds, the overarching investment objective and glidepath of the TDFs will remain the same, and their performance profile is not expected to change.
These enhancements are expected to become effective on or around Dec. 11, 2023.
The announcement further explains that PGIM’s TDF glidepath is designed to combat three of the greatest risks participants face during their lifetime. “Whether it’s not saving enough, retiring during a period of market volatility, or experiencing high inflation during retirement—each of these scenarios can be potentially life-altering to the average American worker,” explained Jeremy Stempien, portfolio manager and strategist at PGIM DC Solutions.
To address these risks, the funds take a differentiated investment approach versus comparable TDFs, with:
- higher-than-average exposure to growth assets earlier in the accumulation stage;
- lower-than-average equity exposure around retirement; and
- an increased allocation to asset classes like TIPS, commodities and real estate during the retirement years, which have historically performed well during inflationary periods.
Meanwhile, the enhancements come on the heels of another new initiative by the firm—PGIM RetireWell™ Solutions—focused on helping DC plan participants achieve better retirement outcomes through holistic advice and guidance. In addition to the TDF and financial wellness offerings, PGIM RetireWell Solutions will include retirement income strategies and managed accounts powered by PGIM’s proprietary advice engine.
“The goal of PGIM RetireWell Solutions is ultimately to help American workers achieve their saving and spending goals both before and into retirement,” stated Michael Miller, head of PGIM DC Solutions. “By reducing fund expenses and integrating financial wellness into the conversation, we believe our platform can help deliver the retirement income investors need to last over the course of their lifetime.”
Additional information can be found here.
[1] Enhancements to the CITs are subject to approval of Great Gray Trust Company, LLC, the trustee of the CITs.
