Tour de Funds: Part III

Posted by: Lauren Young on May 9, 2006

I just got a look under the hood (or should I say bike seat?) of the new Livestrong Funds, which will be launched on May 15.

Some folks from American Century—which will oversee these unique mutual funds—and the Lance Armstrong Foundation stopped by our New York office to discuss the fund launch. Aside from some splashy ads, they haven’t said much about the way the mutual funds will work, and how the Lance Armstrong Foundation will benefit financially. Thus, our meeting.

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Mark Killen, American Century’s senior vice president of corporate and product marketing, says American Century has committed a donation of at least $1 million to the Lance Armstrong Foundation in the first year—but that contribution could be higher if investor interest is strong. The money, he was careful to note, will come from American Century’s corporate arm, and not from shareholder’s pockets.

American Century has retooled its MyRetirement funds with the Livestrong moniker, but, essentially, the portfolios are the same. The fees are reasonable—depending on the portfolio, the expense ratio ranges from 0.77% to 0.95%. (Expenses are higher if you go through a broker.)

The key difference, says manager Jeffrey Tyler, is that the Livestrong funds won’t invest in tobacco stocks because, no surprise here, smoking tobacco causes cancer. Even so, American Century is careful not to call them “socially responsible” funds. “These products are about performance,” Killen says. “You don’t have to compromise doing good with doing well.”

Well, that certainly sounds socially responsible to me!

Anyway, there are five funds to choose from, and each portfolio has a target retirement date. Tyler says he’s a bit conservative in the stock/bond allocation. (Morningstar did an interesting piece about the asset mix of target funds. You’ll find the link here.)

Incidentally, Tyler is very interested in adding real estate as well as commodities to the portfolio mix in the future. “Real estate is a good diversifier. It doesn’t look like stocks. It doesn’t look like bonds,” he says. “Commodities are a great uncorrelated asset class.” Hedge funds are another option, he says. But private equity is verboten, since it can’t be priced on a daily basis.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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