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Retirement target-date funds make hedge fund style bets

December 8, 2014 |

(Reuters) – A fast-growing segment of U.S. retirement plans is using hedge-fund type strategies to bet a small but increasing slice of their assets.

BlackRock Inc (BLK.N), the world’s largest asset manager, and Manning & Napier are among the managers that use strategies such as shorting stocks and trading derivatives in their target-date funds. J.P. Morgan Asset Management and Voya Investment Management are considering adding similar strategies, executives told Reuters.

A hedge-fund style can be more expensive and riskier than just buying stocks and bonds, and workers may not fully realize their exposure, retirement consultants said. On the other hand, they can act as a shock absorber to events like the 2008 financial crisis.

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