Just as lifecycle funds change with time to conform to investors' needs, Fidelity is changing the mix of its 10-year old Freedom Funds to respond to market demands.
By June, the Boston-based behemoth plans to offer four new funds to the lineup, which has grown 248% since 2003.
The new Fidelity Freedom 2045, Fidelity Advisor Freedom 2045, Fidelity Freedom 2050 and Fidelity Advisor Freedom 2050 are geared to addressing the needs of younger investors just coming into the market, the company said.
"We're delighted to be able to offer younger retirement investors access to new Freedom Funds that correspond to their target retirement dates," said Scott L. Gilmour, senior vice president of the Fidelity Institutional Retirement Services Co. "Lifecycle finds are the lynchpin to helping millions of Americans prepare to finance their retirement years."
In addition, the new Strategic Real Return fund, and accompanying advisor share class, combine inflation-protected debt securities, floating rate loans, notes linked to commodities, and real estate investment trusts to provide a fund that is not too risky, but that outpaces inflation.
"The addition of the Strategic Real Return Fund to the lineups of the Fidelity and Advisor Freedom Funds will provide the portfolios with additional diversification as well as hedge against inflation," said Lynne A. Goldman, senior vice presidents of investment product management and development.
Finally, Fidelity will increase the "roll-down" period of the Freedom Fund products, through which the lifecycle funds are moved into a correlating Freedom Income Fund. To account for longer life expectancies and increasing costs of healthcare, the roll down has been extended from between five and 10 years after the client's anticipated target retirement date to between 10 and 15 years.
Also, Fidelity will swap 5% of the portfolios' domestic equity allocations for international equities.
With these moves, said Senior Vice President of Mutual Fund Product Management John Sweeny, "We believe that we're assisting individual investors, as well as investment professionals and their clients, by reducing the possibility that Americans will outlive their hard-earned retirement savings."