* Fund giant cites greater safety of foreign stocks
BOSTON, Sept 23 Fidelity Investments plans to
increase the proportion of international equities in its
target-date retirement funds, saying foreign stocks hold less
risk now than in past years.
Fidelity said on Wednesday it also plans to add more
holdings in commodities and inflation-protected bonds to its
Freedom target-date funds, whose assets totaled about $90
billion at the end of August.
The changes by Fidelity, the Boston mutual fund giant, are
the latest investment formula shift for a target-date fund
family amid much scrutiny of their performance and the risks
they pose for older investors.
On Tuesday, Putnam Investments, also in Boston, said it
planned to add "absolute return" funds to the asset mix of its
own target-date funds in a bid to reduce volatility.
Fidelity said it will aim for its Freedom Funds as a whole
to hold 30 percent of their total equity exposure in
international funds, up from 20 percent currently.
Its Freedom Fund designed for investors who plan to retire
in 2020 will allocate 17 percent of assets to international
equity funds versus 13 percent currently. The funds will
diminish their holdings in domestic stocks at the same time.
Derek Young, a Fidelity investment officer, said the change
reflects the growth in recent years of foreign stocks to more
than half the total market capitalization of stocks worldwide.
He said in a statement that Fidelity has "seen diminished
risks in long-term overseas investing due to improved foreign
market maturity and information flow."
Fidelity said the addition of more commodity and
inflation-protected bond holdings would reduce risk through
diversification. Commodities traditionally provide protection
from inflation, for instance, Fidelity said.
Freedom Fund manager Jonathan Shelon told Reuters the
changes were not meant to change the types of foreign stocks
the funds now hold in a mix of developed and emerging markets.
He said Fidelity last changed the proportion of foreign
stocks in the funds in 2006 when it lifted the percentage of
foreign holdings to 20 percent from 15 percent.
(Reporting by Ross Kerber, editing by Leslie Gevirtz)