T. Rowe Price to place a bigger bet on stocks in retirement funds

FILE PHOTO: Logo of T. Rowe Price Group is pictured at its office in Tokyo
FILE PHOTO: The logo of T. Rowe Price Group is pictured at its office in Tokyo, Japan, January 13, 2017. REUTERS/Toru Hanai/File Photo

February 13, 2020

By Tim McLaughlin

BOSTON (Reuters) – T. Rowe Price Group Inc said on Thursday it would ratchet up the risk in its target-date retirement portfolios, boosting stock allocations to as much as 98% for younger investors.

Target-date funds are popular in 401(k) plans because they do the work of allocating worker and employer retirement contributions into stocks and bonds. Funds with distant retirement dates typically allocate about 90% of their portfolios to stocks, with that percentage declining as retirement nears.

T. Rowe, which manages $292 billion in active target-date portfolios, said it would hold the 98% allocation constant until investors are 35 years from retirement. Currently, the T. Rowe Price 2060 fund has about 89% of its assets in stocks.

The company also said it would boost stock allocations for investors in their retirement years. The final allocation, 30 years past retirement, would be 30% stocks, up from the current level of 20%, the company said.

The transition will happen over a two-year period starting in April. Portfolios closest to retirement will not experience an increase in stock allocations from current levels, the company said in a statement.

Assets in target-date portfolios have been growing at a rapid clip since the 2007-2009 recession, surging to more than $1.7 trillion at the end of 2018, from investor deposits and stock market gains, according to research firm Morningstar Inc.

Vanguard Group dominates the target-date market with nearly 40% market share in mutual fund portfolios, followed by 19% at Fidelity Investments and 13% at T. Rowe Price, according to 2018 figures provided by Morningstar.

(Reporting by Tim McLaughlin; Editing by Chizu Nomiyama and Lisa Shumaker)