PGIM, the global asset management business of Prudential Financial, is lowering fees on its suite of target-date funds and will replace select underlying actively managed equity strategies with passively managed ones, PGIM announced in a news release Oct. 10.
The net expense ratio for target-date mutual funds will drop to 0.25% from 0.40%, with the institutional share class of the collective investment trusts expected to fall to 0.19% from 0.34%, the company said.
The new price points will "provide participants with the opportunity to improve their outcomes in retirement," said Jeremy Stempien, portfolio manager and strategist, PGIM DC Solutions, in an email.
In 2022, the average expense ratio of target-date mutual funds was 0.32%, according to the Investment Company Institute.
PGIM said that a mix of active and passive equity strategies will allow it to leverage a "thoughtful blend of active and passive management."
"Ultimately, our goal is to keep participant expenses low, while providing the ability to add value and mitigate risks with active management, particularly in less efficient asset classes where we believe we can more consistently generate alpha and reduce risk most efficiently," Mr. Stempien said.
As part of the revamp, PGIM's target-date funds, now known as Prudential Day One Funds, will be renamed the PGIM Target Date Funds. The investment objective and glidepath of the target-date funds will remain the same and their performance profile is not expected to change, the company said.
PGIM touted the glidepath of its target-date funds, saying that they have higher-than-average exposure to growth assets earlier in the accumulation stage and lower-than-average equity exposure around retirement than comparable target-date funds. They also pointed to the funds' increased allocation to asset classes like Treasury Inflation-Protected Securities, commodities and real estate during the retirement years, which they said have historically performed well during inflationary periods.
All changes will become effective on or around Dec. 11.