The AARP Financial mutual funds will cease to exist as of Oct. 1, less than three years after launching the funds to much fanfare.

An AARP filing with the Securities and Exchange Commission shows the organization will discontinue the AARP Funds as of Oct. 1, due to competitive pressures.

AARP launched the four risk-profile, index-tracking funds in 2007, after ending its longtime relationship with Scudder Kemper Investments. At that time, AARP cited poor performance as the reason for terminating its partnership with Scudder.

In the SEC filing of July 20, AARP Funds President Richard “Mac” Hisey said: “The development of the AARP Funds was intended to lead change in the marketplace by providing investors with investment options that delivered against all of our investing principles [by being] simple to understand, low cost, coupled with complimentary investment guidance....and low $100 investment minimums.”

The funds never gained enough assets under management, the SEC filing said. “Their small size has resulted in relatively high total expense ratios,” Hisey admitted in the filing.

As of May 2010, AARP had $129 million in long-term mutual fund assets, excluding money market funds and affiliated funds-of-funds, according to Financial Research Corp.

Commenting on the news, Drew Nannis, AARP Senior Vice President, Media Relations and Strategy, said: "The AARP Funds Board of Trustees explored a variety of options other than liquidation such as alternate distribution channels, increasing the marketing spend, and merging the funds into other fund families. However, each of the alternatives required an increase to the fund expenses or the options were outside of our investing principles."

Nannis added, "Given that reasonable investment alternatives now exist in the mutual fund marketplace, it was determined that shareholder interests would be best served by liquidating the AARP Funds."

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