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Fund News Advisors Can Use: Target-Date Funds Come Under Fire With Congress

In this week's fund news, two congressional leaders put target-date funds under scrutiny, Yale's endowment head David Swensen dies, and Alger launches a new semi-transparent active ETF.

Two congressional committee chairs sent a letter to the Government Accountability Office this week, calling for a review of target-date funds. The letter, written by Robert “Bobby” Scott, chairman of the House Committee on Education and Labor, and Patty Murray, chair of the Senate Committee on Health, Education, Labor and Pensions, argues that while TDFs are marketed as “set it and forget it” investments, the funds can vary widely in risk allocations and expenses.

“Retirement experts have raised concerns that the performance of TDFs and level of risk exposure can vary widely—even for those close to retirement,” the letter read. “According to The New York Times, ‘[m]any of the major target-date funds tailored for people retiring in 2020, for example, have roughly 50 to 55 percent of their investments in stock funds.’ One 2020 TDF, which has over $16 billion in assets, is reportedly 60 percent invested in stocks.”

The letter also raised concerns over Trump administration moves to allow the use of alternative investments, such as private equity, in TDFs.

“Little is known about the extent to which TDFs offered in employer-provided retirement plans include alternative assets and how those TDFs with alternative assets impact participants’ fees and returns,” the letter states.

Yale Endowment Chief David Swensen Dies

David Swensen, long-time chief investment officer for Yale University’s endowment fund, passed away this week after a long battle with cancer, according to Bloomberg. He was 67 years old.

Swensen, who managed one of the best performing college endowment funds in the country, was diagnosed with cancer in 2012, and took a temporary leave of absence to undergo treatment.

He became well-known manager in the investment community, famous for his investment strategy of allocating to alternative investments, such as private equity and hedge funds.

“David served our university with distinction,” Yale President Peter Salovey said in a statement. “He was an exceptional colleague, a dear friend and a beloved mentor to many in our community. Future generations will benefit from his dedication, brilliance and generosity.”

Alger Launches Semi-Transparent Active ETF

Investment management firm Alger has launched a semi-transparent active ETF based on its Alger 35 Fund. The Alger 35 ETF (ATFV) will be managed by Dan Chung, CEO and CIO of Alger, who launched the fund to honor 35 of his colleagues who died in Sept 11 attacks.

The fund will invest in 35 “best ideas” sourced from the firm’s analyst team.

“As a way of honoring them, we will donate 5% of the net management fee of ATFV to charities and causes that were important to these Alger employees who perished,” Chung said in a statement.

The firm has licensed Precidian Investments’ ActiveShares model, which doesn’t require Alger to disclose holdings on a daily basis.

Direxion Files to Launch First Leveraged Clean-Energy ETFs

If you’re committed to reducing carbon emissions and mitigating climate change, why not double down on it? Or vice versa? Direxion Investments filed this week to launch a pair of new leveraged ETFs—one bullish and the other bearish on the future of clean energy stocks.

The Direxion Daily Global Clean Energy Bull 2X Shares and Direxion Daily Global Clean Energy Bear 2X Shares would be the first leveraged clean-energy ETFs, according to Bloomberg.

The bull fund would seek to double the daily performance of the S&P Global Clean Energy Index, while the bear version would seek to double the performance of being short the index.  

TAGS: Mutual Funds
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