New Separate Account Suite Helps DB Sponsors Manage Volatility
Principal LDI Separate Accounts offer liability-driven investing for all plans of all sizes
October 9, 2012 (Des Moines, Iowa) – As defined benefit plan sponsors grapple with managing plan volatility in a low-interest-rate environment, many are turning from total-return investment strategies to liability-driven investing (LDI) (PDF: 590 KB). But this transition has generally been difficult for all but the largest plans.
The Principal Financial Group® announces a new suite of separate accounts that make it easier for defined benefit plans of all sizes to implement an LDI strategy. The Principal LDI Separate Accounts (PDF: 170 KB) are a line-up of four fixed income investment options of varying durations that can be combined to match the duration of a plan’s liabilities.
“Until now, sponsors of small and medium-sized defined benefit plans and their financial professionals have struggled to implement an LDI strategy because typically only the largest plans had enough fixed income assets to create the customized bond portfolio needed to match the duration of a plan’s liabilities,” said Janet Kubik, vice president of retirement and investor services at The Principal, the number one provider of defined benefit plans. “The Principal LDI Separate Accounts provide fixed income investment options of varying durations that can be combined together so all sizes of defined benefit plans can use LDI strategies.”
Each of the Principal LDI Separate Accounts offers financial professionals and their defined benefit clients a distinct duration band and an emphasis on corporate bonds.
“The Principal LDI Separate Accounts represent the results of our extensive effort to provide a corporate bond emphasis within the composition of each separate account,” said Kubik. “This focus on corporate bonds is desirable because the funded status of a defined benefit plan is so closely tied to the corporate interest rate environment.”
The LDI Separate Accounts are also supported by a due diligence process to help plan sponsors manage their investment-related fiduciary responsibilities.
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About the Principal Financial Group
The Principal Financial Group® (The Principal®) is a global investment management leader including retirement services, insurance solutions and asset management. The Principal offers businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and insurance through its diverse family of financial services companies. Founded in 1879 and a member of the FORTUNE 500®, the Principal Financial Group has $367.1 billion in assets under management and serves some 18.2 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.
Before directing retirement funds to a separate account, investors should carefully consider the investment objectives, risks, charges and expenses of the separate account as well as their individual risk tolerance, time horizon and goals. For additional information contact us at 1-800-547-7754 or by visiting principal.com.
Investment options are subject to investment risk. Shares or unit values will fluctuate and investments, when redeemed, may be worth more or less than their original cost.
Fixed-income investment options are subject to interest rate risk, and their value will decline as interest rates rise.
Separate Accounts are available through a group annuity contract with Principal Life Insurance Company. Insurance products and plan administrative services are provided by Principal Life Insurance Company, a member of the Principal Financial Group, Des Moines, IA 50392. See the group annuity contract for the full name of the Separate Account. Certain investment options may not be available in all states or U.S. commonwealths. Principal Life Insurance Company reserves the right to defer payments or transfers from Principal Life Separate Accounts as permitted by the group annuity contracts providing access to the Separate Accounts or as required by applicable law. Such deferment will be based on factors that may include situations such as: unstable or disorderly financial markets; investment conditions which do not allow for an orderly investment transactions; or investment, liquidity, and other risks inherent in real estate (such as those associated with general and local economic conditions). If you elect to allocate funds to a Separate Account, you may not be able to immediately withdraw them.
Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 800-547-7754, member SIPC and/or independent broker/dealers. Securities sold by a Princor Registered Representative are offered through Princor®. Princor and Principal Life are, a members of the Principal Financial Group®, Des Moines, IA 50392. Investment options may not be available in all states or U.S. commonwealths.
- Based on number of total DB clients, PLANSPONSOR Magazine, April 2012.
- Conducted by Principal Life Insurance Company.
- “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the Principal Financial Group.
- As of June 30, 2012.