Allianz Global Investor Solutions is planning to lower the fees on its target date and target risk funds in the next few months, according to a firm executive.
Allianz Global Investor Solutions is planning to lower the fees on its target date and target risk funds in the next few months, according to a firm executive.
The fees for Allianz Global’s six target date funds and two target risk funds range from 109 to 88 basis points, and the company would like to bring those costs down by 15 basis points, said Stephen Sexauer, chief investment officer at Allianz Global Investors Solutions.
As the market for target date funds has become more crowded, there is no doubt that the fees of these offerings will decline, Mr. Sexauer said. “[The costs] currently are an inefficiency of the structure, not an inefficiency of intent,” he said.
Specifically, Allianz is discussing creating an institutional trust within its funds that could buy and sell shares of stocks, bonds and other securities, rather than having mutual funds as the underlying investments within the portfolios, Mr. Sexauer said.
“Currently the underlying funds include [Investment Adviser Act of 1940] funds and we buy those at an institutional net asset value, but we still have all of the embedded costs of those funds. We want to create an institutional trust so that we can buy shares without the overhead costs.”
Allianz has $250 million in its target date and target risk funds, and is one of a number of firms looking to reduce the costs of target funds, said Laura Lutton, an analyst at Morningstar Inc.
The average fee on a target date fund is 0.9%, according to Morningstar. “My concern would be, what kind of transparency is there when you are dealing with thousands of securities instead of mutual fund managers, who you know and can research their tenure and performance,” she said. “If Allianz can find a way to have a pool of securities that is more transparent, it would be great.”
