State Street Global Advisors and Apollo Global Management have teamed up to launch target-date funds that offer a mix of public and private markets exposures for defined contribution plans and their participants.
The State Street Target Retirement IndexPlus Strategy, officially launched April 10, will target an allocation of 90% to public markets, using SSGA index funds, and 10% to a mix of private markets exposures actively managed by Apollo, said Brendan Curran, SSGA’s head of U.S. retirement, in an interview.
Major providers of target-date funds have been working to add private market exposures to their offerings but, Curran said, SSGA and Apollo are the first ones to “bring something like this to market.”
One investment consulting veteran who declined to be named said there are any number of customized or plan sponsor-specific target-date funds currently offering a mix of public and private market exposures, but SSGA is in the vanguard among the small circle of target-date fund heavyweights.
Curran said SSGA has been managing target-date funds for more than 30 years, with $200 billion in assets across a range of different strategies and implementation styles.
Curran said SSGA’s work over two years on what became State Street Target Retirement IndexPlus reflected, in part, the evolution of capital markets, with more and more of the corporate opportunity set remaining private rather than listing on a stock exchange.
Whether one looks at U.S. defined benefit plans or non-U.S. defined contribution plans in markets such as Australia and the U.K., private market assets are increasingly seen as a key to building a truly diversified portfolio, he said.
If diversification is a benefit for any target-date fund, SSGA and Apollo's new offering represents an extension of that idea, providing not just private market exposure but a diversified mix of real assets, private credit and private equity, Curran said.
Curran conceded that fees for State Street Target Retirement IndexPlus Strategy will be higher than those offering purely indexed exposures but by providing “meaningfully more diversification … in our view” the fees are quite competitive.
On the topic of how the targeted mix of public and private exposures will be maintained in volatile environments, Curran said like any other target-date funds, the mix of portfolio allocations will fluctuate as markets move. The private markets' allocation will be rebalanced on a quarterly basis.
Daily pricing for 401(k) participants will rely on using the best information available, updated on a quarterly basis, he said.
As of Dec. 31, SSGA had $4.72 trillion in assets under management and Apollo had $751 billion.
