Boston-based State Street Global Advisors, the asset management arm of State Street Corp., has launched target date funds that will include exposure to private markets. The State Street Target Retirement IndexPlus Strategy will include a series of funds with 10% exposures to a blend of private assets managed by alternative asset management giant Apollo.
The funds, which are structured as CITs, include exposure to public markets through index strategies managed by State Street. Apollo’s 10% private allocation sleeve will be seeded with an evergreen fund that Apolllo currently manages that will include exposure to private credit, private equity and real assets. (State Street and Apollo also teamed up to deliver a private credit ETF that launched in February and currently manages about $55 million.)
Brendan Curran, head of U.S. retirement at State Street Global Advisors, compared the evolution of State Street’s target date funds to learning to ride a bicycle: You start with a single-gear bike and then move on to more complex ones.
“In the direct contribution context, the 60/40 balance was the first gear. What we’re announcing today is introducing a new gear, which is access to private markets,” Curran said. “What drove us to build this was feedback from clients. How are the capital markets evolving? The amount of assets in the private market space has tripled in the last decade. If we are building diversification, it’s hard to de facto ignore this part of the opportunity set.”
The new target-date funds join State Street’s family of funds managed by State Street Global Advisors’ Investment Solutions Group, which oversees more than $200 billion in global target-date assets.
“Investors are facing a greater need for diversification as they save for retirement, and Apollo is committed to helping develop solutions to meet that need,” Steve Ulian, Apollo’s managing director, defined contribution and retirement, said in a statement. “The private markets allocation within the State Street Target Retirement IndexPlus Strategy allows investors to gain immediate exposure to a broad portfolio of private market investments.”
Curran said State Street has been building the product for about two years.
“It is reflective of a long-term commitment to innovation that we believe can drive better outcomes,” he said.
He added that the firm is in continued discussions with Apollo about how the product set may evolve, and State Street is also talking with other alternatives managers.
For Apollo, it’s the latest in a series of moves by the asset manager to reach a wider range of investors beyond its traditional institutional base. It aims to grow its asset to the global wealth channel to $150 billion by 2029. It currently has 30 evergreen funds globally and built up an internal distribution team targeting the wealth channel in an effort headed by Stephanie Drescher, Apollo chief client and product development officer.
In addition, in February, InvestCloud, a tech provider for the advisory and wealth management market, announced Apollo as a founding partner in InvestCloud’s Private Markets Account Network, an initiative the firm launched three months ago to combine public and private assets within a single platform.
That same month, private markets specialist iCapital added new capabilities to its Architect portfolio construction tool, including making a customed version available on Apollo’s website.
All of that is in addition to the private credit ETF launched by State Street.