American Century LIVESTRONG funds: Income (ARTOX), 2015 (ARFIX), 2025 (ARWIX), 2035 (ARYIX) and 2045 (AROIX), June 2006

By Editor

. . . from the archives at FundAlarm

These profiles have not been updated. The information is only accurate as of the original date of publication.

June 1, 2006

FundAlarm Annex – Fund Report

Objective

These are “funds of funds” which grow increasingly conservative as the
retirement target date approaches.

Adviser

American Century Investment Management.  American Century is located in Kansas City and manages about $80 billion through 70 funds.  That slightly overstates the case since 10 of their offerings – the LIVESTRONG and One Choice groups – are “funds of funds.”

Manager

Jeffrey Tyler and Irina Torelli.  Mr. Tyler is the lead manager and has been managing money for American Century since 1987.  Ms. Torelli joined the firm as a quant analyst in 1997 and became a co-manager in 2005.

Opening date

August 31, 2004.  Formerly called the “My Retirement” funds (another marketing gem), they were rebranded as LIVESTRONG funds on May 15, 2006.

Minimum investment

$2500 for both regular and tax-sheltered accounts, and $2000 for a Coverdell Education Savings Account.  The IRA minimum is $500 if you establish a monthly automatic investing plan.

Expense ratio

The Investor class shares are 0.2% above and beyond the underlying funds’ operating expenses. The total expense ratios range from 0.77% for the Income Portfolio to 0.95% for 2045.

Comments

The LIVESTRONG funds, like the MY RETIREMENT ones before them, invest in 14 other American Century funds.  The funds had very modest performance in their first year or so of operation and drew little interest from retail investors.  In rebranding the funds as  LIVESTRONG, American Century did four things:

  • It acquired Lance Armstrong as a spokesmodel.
  • It agreed to contribute at least $1 million of corporate – not investor – money to the Lance Armstrong Foundation in each of the next several years.
  • It eliminated tobacco companies from the investment mix.
  • And it latched on to a sort of goofy marketing slogan (“Get your Lance face on!”), accompanied by a very odd website.

All of which is unobjectionable, despite some snickering from the pundit gallery (“Tour de Funds”).  The Armstrong Foundation is
generally well-respected and highly-rated by the charity watchdog groups.  There’s a logical tie for the American Century funds, whose founder and founder’s wife are both cancer survivors.  The founder already supports a cancer research center. Fidelity has already led the way on celebrity spokesmodels (Sir Paul McCartney) and a number of other fund companies (Ariel and Bridgeway among them)  have charitable missions.

But none of that offers a reason to invest in the funds.  They seem a tiny bit more costly and noticeably less aggressive than the offerings from the Big Three.  Here, for example, is a comparison of American Century’s target-date 2025 fund to those of the Big Three:

 

American Cent.

Fidelity

Price

Vanguard*

 US stocks

50

58

60

71

Int’l stocks

15

15

19

11

Bonds

30

20

15

18

Cash

5

7

5

0

Expenses

.88

.75

.82

.20

*The Vanguard portfolio reflects changes that will occur early in June, 2006. We reported on those earlier.

The LIVESTRONG funds are distinguished by their annual asset mix adjustment, while the others wait for five years.  The LIVESTRONG funds also hold a few international bonds (something like a half percent for 2025), a little real estate (2%), some emerging markets equity exposure (3%), and the manager is meditating upon commodities.

Bottom line

It’s not clear that there’s any particular reason to choose these funds over their competitors. Retirement investors seeking a more-aggressive portfolio might consider T. Rowe Price and then make their own contribution (and receive their own tax deduction) to a worthy charity such as the Armstrong Foundation.  (While you’re at it, send a little to FundAlarm as well.)

Company website

Livestrong Portfolios