MassMutual Introduces New Target Date Fund Family Subadvised By A Legg Mason-Affliliated Manager That Aims To Help Reduce Market Volatility For Retirees And Pre-Retirees

The Legg Mason Total Advantage Target Date Funds seek to reduce market volatility for retirement savers when they’re most vulnerable: just before and right after retirement

SPRINGFIELD, Mass., May 30, 2018 – Massachusetts Mutual Life Insurance Co. (MassMutual) is introducing a new target date fund family subadvised by a Legg Mason-affiliated manager, QS Investors, LLC, that aims to help reduce market volatility for retirement plan savers when they are most vulnerable to market losses: just before and right after retirement.

The Legg Mason Total Advantage Funds, a series of bank-maintained collective investment funds sponsored by Wilmington Trust, N.A. and available through MassMutual 401(k)s and other defined contribution retirement plans, offers retirement savers a combination of upside return potential with the goal of reduced volatility. The Funds incorporate both active and passive investment management strategies by investing in underlying funds that are managed by 16 different managers. A stable value investment component is a key part of the strategy to help retirement savers manage market volatility.

The Legg Mason Total Advantage Funds’ architecture gives investors access to not only Legg Mason managers but also to a wide array of external managers. QS Investors is one of Legg Mason’s institutional asset manager affiliates, with an expertise in multi-asset class portfolios.

“The five years before and after retirement can be a particularly vulnerable time for retirement savers,” said Tina Wilson, Head of MassMutual Investment Solutions Innovation. “With a relatively short time horizon to recoup investment losses, pre-retirees and retirees risk significantly diminished assets and retirement income from market corrections and volatility. Unfortunately, some retirees may be taking more risk than they realize.”

Nine in 10 retirees (94 percent) and pre-retirees (92 percent) “strongly agree” or “somewhat agree” that it is important to take steps to avoid major stock market losses right before retirement, according to the MassMutual Retirement Savings Risk Study1. One in two pre-retirees (49 percent) and one in three retirees (32 percent) are apprehensive about taking too much investment risk, the study finds.

Yet, 59 percent of pre-retirees and 32 percent of retirees describe their primary investment strategy as focused on either “aggressive growth” or “moderate growth,” according to the study, which indicate that the level of risk in their investment portfolio may be too high for their age and goals. Although more retirees focus on preserving their assets in retirement, MassMutual’s study shows, 32 percent continue to invest primarily for growth five years into retirement and 23 percent maintain that strategy 10 years into retirement.

Financial advisors often caution retirees and pre-retirees against taking too much investment risk, to guard against steep paper losses at a time in which they will need to generate retirement income. Study respondents who work with a financial advisor (46 percent of pre-retirees; 57 percent of retirees) say their advisor recommends they change their investment strategy. Of that group, 73 percent of pre-retirees and 88 percent of retirees report that their advisor recommended that they invest more conservatively. Target date funds are evolving toward more dynamic structures that have the potential to better balance risk and reward for individuals, depending on macros market factors, their age and retirement plans.

 

The Legg Mason Total Advantage Funds seek to manage investment risk with a series of proprietary investment strategies, including Adaptive Asset Allocation and Next-Generation Diversification.

  1. Adaptive Asset Allocation leverages a Retirement Keeper tool and Tactical Accelerator, both designed to deliver additional value through asset allocation and adapting to evolving market conditions. The Retirement Keeper tool seeks to minimize exposure to large market losses in the five years before and after the target retirement date. The Tactical Accelerator is designed to boost return potential through opportunistic asset allocation, in response to market indicators.
  2. Next-Generation Diversification combines both active and low-cost passive investment styles, employs a multi-manager approach to diversification across multiple asset classes, and includes a stable value fund to help reduce market volatility and generate more stable returns.

 

The Legg Mason Total Advantage Funds employ a glide path, which allows for a gradual adjustment of the asset allocation to reduce exposure to equities as savers approach retirement, shifting from an equity weight as high as 97 percent for those with 30 or more years until retirement to as low as 34 percent for those who are retired. Weightings for stable value and other fixed investments increase proportionately. The actual ratio of the weighting between equities and fixed income is calibrated according to the target retirement year.

“We have found that investors nearing retirement are woefully under-saved for this stage in their lives. Just as MassMutual determined in their survey, right before and after retirement, plan savers are most vulnerable to market losses. So, they are entering this phase with less money than anticipated, and the risk for loss is real,” said Adam Petryk, Head of Multi-Asset and Solutions at QS Investors. “The Legg Mason Total Advantage Funds provide savers with the powerful combination of upside return potential through expert asset allocation and investment management with the added potential to help reduce volatility. Our primary goal is to provide the best possible outcome for retirees, through managing volatility and market risk to help minimize the impact on their hard-earned savings.”

About MassMutual
MassMutual is a leading mutual life insurance company that is run for the benefit of its members and participating policyowners. MassMutual offers a wide range of financial products and services, including life insurance, disability income insurance, long term care insurance, annuities, retirement plans and other employee benefits. For more information, visit www.massmutual.com.

About Legg Mason
Guided by a mission of Investing to Improve Lives,TM Legg Mason helps investors globally achieve better financial outcomes by expanding choice across investment strategies, vehicles and investor access through independent investment managers with diverse expertise in equity, fixed income, alternative and liquidity investments. Legg Mason’s assets under management are $754 billion as of March 31, 2018. To learn more, visit our web site, our newsroom, or follow us on LinkedIn, Twitter, or Facebook.

About Wilmington Trust, N.A.
Wilmington Trust, N.A. provides Corporate and Institution services including institutional trustee, retirement plan, agency, asset management, and administrative services for clients worldwide who use capital markets financing structures. Wilmington Trust N.A.’s Institutional Retirement Services division provides directed trustee, custody, and fiduciary services for retirement plans, companies, foundations, organizations, and financial institutions. Wilmington Trust, N.A. is a leader in the collective investment trust market with over $30 billion in assets under administration across funds managed by more than 50 sub-advisors and available on more than 35 trading platforms.

Wilmington Trust maintains offices throughout the United States and internationally in London, Dublin, and Frankfurt. For more information, visit www.WilmingtonTrust.com.

1MassMutual Retirement Savers Study, https://www.massmutual.com/-/media/Files/MM%20Risk%20Study%20Report.pdf

The Funds will be collective investment funds available exclusively to qualified retirement plans and will be established by Wilmington Trust, N.A. as trustee, and sub-advised by QS Investors, LLC. The information contained herein is preliminary and subject to change. This presentation does not constitute an offer to sell or a solicitation to buy an interest in the Funds. Any such offer or solicitation will be made, if at all, only pursuant to the Funds' governing trust documents and Investment Policy Statement. This presentation is qualified in its entirety by such materials.

Retirement Keeper refers to the Dynamic Risk Management Period of the Strategy. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are in rapidly accelerating, market appreciation may not be fully realized due to the Portfolio's more conservative allocation.

The model used to manage a Fund's assets provides no assurance that the recommended allocation will either maximize returns or minimize risks. There is no assurance that a recommended allocation will prove the ideal allocation in all circumstances. In rapidly declining markets, significant losses will likely occur. Conversely, when markets are rapidly accelerating, market appreciation may not be fully realized due to a fund's more conservative allocation. In addition, because the portfolio invests in underlying funds, QS Investors may not be able to shift allocations in time to capture an immediate or sudden spike in the market. Additional risks may include those risks associated with investing in real estate, commodities and private equity. Please see the Funds' Investment Policy Statement for more information regarding risks associated with investing in the Funds.

While an investor's retirement age is a central component in deciding which series option is right for the investor, other relative factors should also be considered. For instance, an investor's individual circumstances, long-term investment goals and risk tolerance - and especially if the investor falls between two retirement years - should all be carefully considered. These and other factors, as well as the Funds' risks, should be discussed with an investor's financial professional.

Wilmington Trust, N.A. Collective Investment Funds are trust company-sponsored collective portfolios; they are not mutual funds. The Funds and units therein are exempt from registration under the Securities Act of 1933, as amended, and the Investment Company Act of 1940.

Participation in the Funds is limited primarily to qualified defined contribution plans and certain state or local government plans. Investors should consider the investment policy, objectives, risks, charges and expenses of any pooled investment company carefully before investing. The Additional Fund Information and Principal Risk Definitions contains this and other information about a Collective Investment Trust Fund and is available at https://www.wilmingtontrust.com/repositories/wtc_sitecontent/PDF/Principal_Risk_Definitions.pdf. This document should be read carefully before investing. Investments in the Fund are not insured by the FDIC or any other government agency, are not deposits of or other obligations of or guaranteed by Wilmington Trust, or any other bank or entity, and are subject to risks, including possible loss of the principal amount invested.

The information in this material has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Opinions, estimates and projections constitute the judgment of Wilmington Trust and are subject to change without notice. This material is for educational purposes only and is not intended as an offer, recommendation or solicitation for the sale of any financial product or service or as a determination that any investment strategy is suitable for a specific investor. There is no assurance that any investment strategy will be successful. Diversification does not ensure a profit or guarantee against a loss. Past performance is no guarantee of future results.

Wilmington Trust is a registered service mark. Wilmington Trust Corporation is a wholly owned subsidiary of M&T Bank Corporation. Wilmington Trust Company, operating in Delaware only, Wilmington Trust, N.A., M&T Bank and certain other affiliates, provide various fiduciary and non-fiduciary services, including trustee, custodial, agency, investment management and other services. Wilmington Trust, N.A., serves as the Trustee of the Funds.

Investments: Are NOT Deposits | Are NOT FDIC-Insured | Are NOT Insured By Any Federal Government Agency, have NO Bank Guarantee and May Go Down In Value