Fidelity puts 6 million savers on risky path to retirement (news)

[hadabeardonce]

https://www.msn.com/en-us/money/retirement/special-report-fidelity-puts-6-million-savers-on-risky-path-to-retirement/ar-BBJSUgr

...Fidelity portfolio managers now try to time market shifts, for instance by moving billions of dollars out of money-losing commodities bets and into Chinese stocks and U.S. tech shares, regulatory filings show.

Fidelity said its new market-timing strategy, which it calls “active asset allocation,” can capitalize on finding underpriced assets over a 1-to-5 year time horizon. Since 2014, Freedom Fund portfolio managers have had discretion to adjust allocations in major asset classes by up to 10 percentage points in either direction.

Freedom Fund portfolio managers and quants are experimenting with artificial intelligence and algorithms similar to ones used by hedge funds to identify hidden shifts in the market to adjust investment allocations, according to Fidelity’s published research.

The changes have paid off in the short run, with Freedom Funds’ 1-year and 3-year returns beating internal benchmarks. Fidelity also credited junk bonds for helping bolster returns, according to portfolio manager commentary posted on its website.

In the long run, the biggest risk in target-date funds is that they won't meet investor expectations for avoiding losses, said Morningstar analyst Jeff Holt.

My wife is in a target date fund, FNSBX. Seems like I should check on what else she has available. I remember seeing some "Spartan Funds" that followed indexes, but I wasn't comfortable enough adjusting her asset allocation at the time she first started working.

The article also talks about increased exposure to equities, but I'm less alarmed by that.

[appleshampooid]

I'm all for more exposure to equities, but this part is downright scary:

Instead, Fidelity portfolio managers now try to time market shifts, for instance by moving billions of dollars out of money-losing commodities bets and into Chinese stocks and U.S. tech shares, regulatory filings show.

Uhhhhhhhh...mmmmmmmm...no thanks.

I'm not in any target date funds; I would certainly HOPE that vanguard funds wouldn't engage in this market timing bullshit, but I'll manage my allocation myself, thanks much.

[appleshampooid]

Although now that I think of it, this explains why Fidelity's target date funds have expense ratios in the .75% range, eww. I discounted them immediately in my 401(k).

[frozen]

I have target date funds with Fidelity — freedom 2030 and freedom 2035.

I read this article and I’m thinking of moving the money.
I also read something similar about Wells Fargo — as if they need more negative publicity.

[hadabeardonce]

Code: [Select]

Before
100% FNSBX .64% expenses FID FREEDOM 2050 K

After
50% FXAIX .02% expenses FID 500 INDEX IPR
20% FSMAX .05% expenses FID EXT MKT IDX IPR
20% FSGSX .08% expenses FID GLB XUS IDX INS
10% FXSTX .04% expenses FID US BOND IDX IS
^ those are the four cheapest and the only index funds(excluding FSIYX) she has access to. We'll probably make the switch to that asset allocation soon.

[Indexer]

The firm also scrapped a long-held belief of sticking to pre-set allocations of stocks, bonds and other assets in target-date funds.

This is active on top of active. I don't see this going well.

The Fidelity Freedom funds are already funds made up of other Fidelity active funds. This is saying that Fidelity is also playing an active market timing role in deciding how they change your allocation to the different active funds over time.

If you wanted to pick your own AA, and not leave it up to Fidelity's discretion, portfolio management would be a nightmare. You would regularly have to tweak your other holdings and/or change which Freedom fund you use. That completely defeats the point of a Target Retirement fund.

They are surprised money is leaving? The funds aren't functioning the way people expect. Of course money is leaving.

[Cali]

Well now this is good to know. I’ll have to review my corporate IRA.

[terran]

Note that fidelity has their actively managed Fidelity Freedom target date funds, which this article appears to be about, and they also have Fidelity Freedom Index funds which are very similar to the vanguard target date funds.