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Target-Date Ads in SEC's Cross Hairs

Plus, Oppenheimer fund gets a facelift, and more.

Morningstar Analysts, 06/21/2010

The SEC has proposed new target-date fund advertisement disclosure guidelines aimed at reducing potential investor confusion or deception.

The proposed rule, if adopted, would require target-date funds that include retirement dates in their names to disclose in marketing materials what the funds' asset allocations will be on those target dates. This would make it easier for investors to compare, for example, how much competing target-date funds will have in fixed-income securities and cash at the funds' target dates.

The SEC is also considering a proposal that would require marketing materials to include a table, chart, or graph depicting the target-date fund's asset allocation over time, along with a statement highlighting the fund's final asset allocation.

Regulators also may require target-date marketing materials to state target-date retirement funds shouldn't be selected based solely on age or retirement date and are not a guaranteed investment, and the stated asset allocations may be subject to change.

Target-date funds have experienced massive growth since their introduction in the mid-1990s. These funds currently have $270 billion in assets and have become prevalent as default options in 401(k) plans.

The SEC proposals are a response to dramatic losses suffered by some 2010 target-date funds in 2008. Many investors expected such funds, which were two years away from their target date, to better preserve capital in 2008's market downturn. The average 2010 target-date fund lost 24% in 2008, and all but one lost more than 10%. The range of losses varied greatly, too, from 9% to 41%.

The public has at least 60 days to comment on the proposals. The text is available here.

Oppenheimer Fund Gets a Total Face-Lift
Oppenheimer Quest Balanced QVGIX will effectively become a different fund Aug. 16, 2010, according to a recent filing. The fund that has been managed since 1992 by Colin Glinsman of Oppenheimer Capital (which is owned by Allianz and unrelated to OppenheimerFunds) will become Oppenheimer Global Allocation, get a new manager, and employ a new strategy that will enable it to invest in stocks, bonds, and alternative asset classes from around the world. It will also be able to short securities and will establish a Cayman Islands subsidiary that will invest as much as 25% of assets in commodity-linked derivatives. Chris Leavy, OppenheimerFunds' CIO of equities, and Art Steinmetz, OppenheimerFunds' CIO of fixed-income, will run the fund. Quest Balanced looked great in Glinsman's first 12 years on the job but challenged in the past five.

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