T. Rowe to cut target-date fees, add fund line

The firm is reducing fees and is adding a mutual fund version of its Retirement Blend series, which has existed since 2018 in CIT form.

The third-largest target-date mutual fund provider, T. Rowe Price Group Inc., is lowering fees across its product line, according to filings made Monday with the SEC.

The cuts will result in an average decrease in fees of 6.3 basis points among its mutual funds and 4.8 bps for its collective investment trusts, on an asset-weighted basis, the firm announced in connection with the filings.

T. Rowe is also adding a mutual fund version of its Retirement Blend series, which has existed since 2018 as a collective investment trust. That series invests in a mix of actively managed and passively managed underlying investments.

The fee reductions will take effect July 1, and the forthcoming mutual-fund series is slated to launch July 28, according to the firm.

The changes follow others T. Rowe announced in 2020, including adjustments happening over the course of two years to make some of its products among the most equity-heavy target-date funds on the market. The firm also introduced a “unitary fee” structure designed to keep overall target-date costs unaffected when the fees of underlying investments change. That change resulted in lower costs for some target-date funds, the firm said at the time.

Last month, the company touted an upgrade by Morningstar in its Retirement Funds series to a “gold” rating, including high scores among the “process, people and parent” categories the ratings firm uses to evaluate products.

T. Rowe managed $351.6 billion in target-date products as of March 31, and it saw net positive sales of $4.5 billion during the first quarter, according to its most recent earnings report. The company’s target dates represented $332.2 billion at the end of 2020, up from $292.4 billion at the end of 2019. Its lines of target dates, including funds and CITs, had net redemptions of $6.5 billion in 2020, according to the fourth-quarter earnings report.

Last year was potentially the first on record in which industrywide sales of target-date mutual funds went negative, largely as a result of the pandemic.

T. Rowe’s news follows a separate announcement last week from the firm indicating that it would outsource more of its retirement plan record keeping to allow the firm to focus more on investment management and customer service. FIS, which already provides the record-keeping system used by T. Rowe, will take over “retirement technology development and core operations” as of Aug. 1.

NEW SERIES

The Retirement Blend series will use active management “in market sectors where a fully passive management approach may not be appropriate, while also providing the market exposure and reduced costs common to a passive investment approach,” the company said in its announcement.

The series will be managed by the same team overseeing the firm’s other target-date lines: Wyatt Lee, Kimberly DeDominicis and Andrew Jacobs van Merlen.

It will be available in investor and I share classes, with fees ranging from 34 bps to 44 bps for the former and from 19 bps to 26 bps for the latter, varying by target year.