Press release: Russell develops a fully objective metric to measure, compare target date fund families (Russell.com)

Russell develops a fully objective metric to measure, compare target date fund families

Tacoma, WA — September 23, 2009 —Russell Investments has developed pioneering methodology to provide investors with a consistent way to measure and compare target date fund families. The Russell Target Date Metric* offers a returns-based measure of how well a target date fund family performed over a specific time.

"While target date funds are designed to be easy to use, the design behind them is complex," said Grant Gardner, director for portfolio strategies at Russell. "Comparing one fund family to another tends to be subjective at best, but now defined contribution plan sponsors and others can select among the increasing variety of target date products with an objective, returns-based measure of performance that is appropriate for evaluating target date fund families."

Gardner added that the Russell Target Date Metric was designed to measure the performance of an entire family of target date funds in terms of their purpose—building wealth for retirement. It offers conventional performance universes over typical historical intervals, such as three months, one year and three years.

"In our work with investment consultants, plan sponsors, asset managers and investment advisors, we heard a demand to marshal our pioneering, objective approach to index construction in order to offer a performance metric for target date funds by which all fund families could be measured consistently," Gardner said. "This tool solves the current industry problem by measuring the performance of an entire family of target date funds in a single metric."

While developed by some of the same innovative thinkers behind the Russell Indexes, the Russell Target Date Metric is not a target date benchmark index. Instead, it is an index that measures the comparison of the retirement wealth generated by a family of target date funds to the wealth generated by some selected benchmark over the selected time period. The metric takes into account all aspects of the family's investment process, including active management, asset allocations within equity and fixed income and glide path design.

A feature of the methodology measures the wealth generated by the family of funds as a weighted average of the returns of all the funds in the family. The weight attached to each fund's return is determined by where that fund is along the glide path and the pattern of cash contributions. The methodology results in the returns of the funds nearer their target dates having greater weights than the returns of funds more distant from their target dates.

"This characteristic reflects the actual behavior of a retirement portfolio," said Gardner. "Returns near retirement have more impact on retirement wealth because they are applied to larger cumulative cash contributions than are returns earlier in the investor's career."

Russell currently is calculating the metric for 43 fund families and expects to begin making the Target Date Metric for the funds comparisons available in the fourth quarter.

* patent pending

About Russell
Russell Investments is a global investment company with $151 billion in assets under management as of June 30, 2009. Russell serves individual, institutional and advisor clients in more than 40 countries and provides investment solutions including mutual funds, retirement investments, institutional asset management, implementation services and global stock market indexes. Russell is world-renowned for its depth of manager research, quality of manager selection and access to some of the world's leading investment managers. It helps investors of all sizes put this access to work in corporate defined benefit and defined contribution plans, and in the life savings of individual investors.

Contact:
Steve Claiborne: 253-439-1858

Russell Investments, a Washington, USA corporation, operates through subsidiaries worldwide, and is a subsidiary of The Northwestern Mutual Life Insurance Company.

Russell Investments is the owner of the trademarks, service marks and copyrights related to its respective indexes.

Indexes are unmanaged and cannot be invested in directly.

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