NEW YORK, April 7, 2008 — Dow Jones Indexes today announced that PIMCO has selected the Dow Jones Real Return Target Date Indexes to serve as benchmarks for the PIMCO RealRetirementSM funds.
The Dow Jones Real Return Target Date Indexes are designed to serve as benchmarks for lifecycle portfolios that start out aggressively to grow assets and end with a conservative mix of investments based on the portfolio’s “target date.” The indexes also can serve as the basis for financial products.
“The Dow Jones Real Return Target Date Indexes are the best-suited barometers for the growing number of active lifecycle funds that allocate to a highly diverse mix of assets and have a focus on the portfolio’s ‘real’ return. PIMCO’s decision to benchmark their new funds to these indexes affirms our continued leadership in providing comprehensive and meaningful measurement tools for the target date investment community,” said Michael A. Petronella, president of Dow Jones Indexes.
“With the proliferation of target date strategies and investment products in recent years, we believe that benchmark selection is an important step in launching our own target date funds. We chose the Dow Jones Real Return Target Date Indexes because they provide an objective, well-constructed and appropriate representation of a diversified mix of assets that are suited for DC plan participants. The indexes’ focus on inflation protection and use of real assets also were key criteria in our decision. Dow Jones Indexes has truly been exceptional in taking target date indexes to the next level,” said Bob Greer, Real Return Product Manager of PIMCO.
Launched last month, the Dow Jones Real Return Target Date Indexes comprise 11 indexes, nine with target dates in 5-year intervals out to 2045, plus a Dow Jones Real Return 40+ Index and Dow Jones Real Return Today Index. Each index in the series represents a mix of sub-indexes representing stocks and bonds, Treasury Inflation Protected Securities (TIPS) — guaranteed by the U.S. government to pay interest above the rate of inflation — as well as commodities and real estate, which potentially counterbalance inflation.
The sub-indexes are the Dow Jones Wilshire Global Total Market Index(sm), Lehman Aggregate Bond IndexSM, Lehman U.S. TIPS IndexSM, Dow Jones-AIG Commodity IndexSM and Dow Jones Wilshire Real Estate Securities IndexSM.
The component asset classes are weighted within each Dow Jones Real Return Target Date Index to measure a targeted level of risk. Stocks and bonds are classified as nominal assets with high- and low-risk profiles, respectively. Real estate securities and commodities are considered real assets with high-risk profiles, and U.S. TIPS are considered real assets with a low-risk profile.
Over time, the weights are adjusted based on predetermined formulas to adjust the risk level systematically as the index’s target date approaches. For example, the Dow Jones Real Return 2045 Index includes approximately 90% component allocation to the high-risk assets (equities, real estate and commodities). When the index reaches its target date, the index composition will have changed to about 70% in the low-risk component assets (bonds, U.S. TIPS). The index will then convert into the Dow Jones Real Return Today Index, which maintains constant exposure to the conservative asset allocation.
The equity, real estate securities and bond portions of the Dow Jones Real Return Target Date Indexes are weighted by market capitalization. The indexes are reviewed on a quarterly basis. Back-tested estimated history is available back to January 2000(i).
The Dow Jones Real Return Target Date Indexes are part of the Dow Jones Portfolio index family, which includes the Dow Jones Relative Risk and Dow Jones Target Date indexes. For more information on the Dow Jones Real Return Target Date Indexes, please visit www.RealReturnIndexes.com.
(i) The Dow Jones Real Return Target Date Indexes were first published on February 21, 2008. All estimated daily historical closing prices prior to that date are based on back-testing (i.e., calculations of how the index might have performed in the past if it had existed). Back-tested performance information is purely hypothetical and is solely for informational purposes. Back-tested performance does not represent actual performance, and past performance is not indicative of future results.