Vanguard is planning to offer three market-neutral funds-of-funds specifically designed for retirees in that they will make regular monthly payments yet preserve the capital and, thereby, continue to expose investors to the markets.
The three funds are Managed Payout Real Growth, Managed Payout Moderate Growth and Managed Payout Capital Preservation, which will aim to return annual payout levels of 3%, 5% and 7%, respectively.
“We believe the new funds will appeal to individuals who are seeking a regular income stream in retirement but who also want to retain access to their accounts to meet unexpected expenses or, potentially, for estate-planning purposes,” said Vanguard Chief Executive Officer John J. Brennan.
“The Managed Payout funds will broaden Vanguard’s lineup of retirement income solutions, which range from traditional balanced and lifecycle funds to immediate annuities and customized withdrawal plans,” Brennan added.
The funds will invest in Vanguard U.S. and international stock index funds, bond and REIT index funds, inflation-protected securities, money market instruments, commodity-linked investments and market-neutral and absolute-return strategies.