TD Ameritrade Holding Corp. launched a family of target-date portfolios made up of exchange-traded funds.
Analysts said though many fund companies offer target-date or lifecycle funds, the Amerivest Target Date Investment Portfolios are the first made up exclusively of exchange-traded funds.
Target-date funds are designed to grow more conservative as the investor’s retirement date approaches. Morningstar Inc. lists 150 such funds in the United States.
Aim Investments Inc., a Houston wealth management subsidiary of Amvescap PLC of London, launched a family of lifecycle funds in March. The six target-date funds invest in both exchange-traded funds from PowerShares Capital Management of Wheaton, Ill., and Aim’s proprietary mutual funds.
Each of TD Ameritrade’s six portfolios consist of 15 exchange-traded funds, Bill Vulpis, the managing director of investor products for the Omaha company, said in an interview last week.
Pricing played a role in TD Ameritrade’s decision to use exchange-traded funds in its first target-date product,
Mr. Vulpis said. “When we looked closely at the expense ratio, we realized that we could offer similar diversification at a much less expensive price just by using exchange-traded funds instead of mutual funds.”
The Amerivest Target Date Portfolios are managed by Amerivest Investment Management LLC, an investment management subsidiary that TD Ameritrade launched in 2003. The unit will select the used in the target-date portfolios from a wide variety of third-party providers, according to James Frawley, a spokesman for TD Ameritrade.
Mr. Vulpis said the portfolios are available for a minimum investment of $25,000. The funds are targeted for retirement in 2010, 2015, 2020, 2025, 2030, and 2040.
The products will be sold through advisers to be used in self-directed accounts such as individual retirement accounts.
“These ETFs can be tracked on the American Stock Exchange and create a great deal of transparency,” Mr. Vulpis said.
TD Ameritrade will add portfolios with later targets down the road, he said.
In March, Charles Schwab Corp. added a target-date fund oriented toward retirement in 2050 to its Schwab Managed Retirement Trust Funds. The San Francisco company also has funds for retirement in 2010, 2020, 2030, and 2040.
A sixth fund, the Schwab Managed Retirement Trust Fund-Income, is designed to provide income during retirement.
Each fund is a portfolio diversified across asset classes and supported by relationships with 11 independent subadvisory firms.
Mr. Vulpis said TD Ameritrade is hoping its family of target-date funds will stand out by using exchange-traded funds.
“A lot of firms are looking at target-date funds, and there are something like 150 different target-date funds on the market,” he said. “But this is a differentiator, because it uses exchange-traded funds. … I think when this is announced, a lot of other providers will begin offering something similar.”
Toronto-Dominion Bank has a minority stake in TD Ameritrade, which had $278.2 billion of assets under management at the end of last year.
