begin withdrawing roughly 5% annually with no additional contributions, and that withdrawal
rate will increase to approximately 8%-10% annually by 5-6 years after the target date. However,
the specific allocation to risky assets like equities at any point in time is not fixed in a pre-
determined glide path, but is built on an investment-by-investment basis within an appropriate
range for each target portfolio. As is illustrated in the following graphic, the end result of our
approach is a glide range with more conservative allocations as the target date approaches, but
with the actual allocation within the range determined by Manning & Napier based upon the
risks and opportunities in the current market environment.

Manning & Napier's Glide Range
‘Yoors to Tergat oats Aftat Tatget Dato

31 Yoars Myeats 0 Aymate. 2 4 ~ Bybars:

100%

Range —>
of Stock
Exposure
50%
0%
Retirement Retirement Retirement Retirement Retirement Retirement
Target 2050 Target 2040 Target 2030 Targot 2020 Target 2010 Target income
70% - 95% stocks: 70% - 95% stocks: 56% - 83% stocks 40% » 70% stocks 20% - 60% stocks 5% - 35% stocks
85% midpoint 85% midpoint 20% midpoint ‘55% midpoint 40% midpoint 20% midpoint
For Investors
Planning 2045 + 2035 - 2044 2025 - 2034 2015 - 2024 2008 - 2014 before 2008
to Rotire In
Large Capitalization ‘ur Mid Capitalization ‘Small Capitalization m International Equities
Short Terin Fixed Income am Intermadiate Term Fixed Income ‘@ Long Term Fixed Income Cash

We believe that failure to adapt to the changing nature of investment risk can turn a glide
path into a glide trap because the historical asset class return patterns on which it is based will
inevitably fail in periods like we have seen over the past year. As an example, your asset
allocation in December 1999 (before the bursting of the internet bubble) with extreme stock
market valuations should not be the same as in the bottom of the bear market in December 2002,
yet many target date fund managers are trapped into a glide path that reduced exposure to risky
assets every year even when those risky assets were priced for a better risk/reward trade off
going forward. We believe a flexible glide path that factors in time, withdrawal needs and
market conditions allows the manager to balance the conflicting goals of managing capital risk,
inflation risk and longevity risk. As such, we have concerns about placing restrictions on asset
allocations along the glide path as it could hamper target date fund managers’ ability to pursue
these long-term investment objectives.

Instead, we believe it is important for target date fund managers to effectively
communicate to both Plan fiduciaries and participants the key assumptions they have made
regarding investor time horizons and withdrawal needs when constructing their glide path. Just
as important, target date fund managers should explain how they intend to proactively adjust
their allocations in a changing environment and provide both their experience and actual track
record of making such proactive adjustments over a range of environments, as opposed to simply


ante

ADVISORS, INC.

August 23, 2010

Securities and Exchange
Commission
100 F Street, NE
Washington, DC 20549
Attn: Elizabeth M. Murphy, Secretary

Re: File Number S7-12-10
Ladies and Gentlemen:

Manning & Napier Advisors, Inc, appreciates the opportunity to submit comments on the
proposed regulations for Target Date fund marketing material. Manning & Napier has managed
assets to mect life cycle objectives for over 35 years through a variety of market conditions,
including six bear markets. We currently manage over $30 billion, with over $14 billion in
various target date or target risk life cycle objectives across different investment products. With
this experience, we see firsthand the important role that life cycle investing plays in achieving
retirement goals,

Manning & Napier’s approach to life cycle investing involves flexibility in managing the
glide path and underlying securities of a Target Date portfolio. Our long-term investment
performance demonstrates that being able to adjust a portfolio’s asset allocation along the glide
path to a given market environment can assist in appropriately managing many of the risks
inherently involved with investing retirement assets. In light of the foregoing, Manning &
Napier applauds the SEC’s desire to allow managers the necessary flexibility to construct Target
Date portfolios while also increasing investor awareness and understanding of Target Date funds.
‘As discussed in more detail below, we broadly support the concept that plan sponsors, plan
participants and individual investors need additional, and more transparent, information.
regarding Target Date funds. In sum, Manning & Napier:

strongly supports allowing asset allocation ranges and requiring prominent
glide path disclosure for Target Date funds;


annie

ADVISORS, INC.

290 Wooddliff Drive » Fairport, NY 14450 » T(585) 325-6880 + (800) 551.0224 « wwew.manning-napler.com

January 14, 2011

Department of Labor

Employee Benefits Security Administration
200 Constitution Avenue, NW
Washington, DC 20210

Attn: Target Date Amendments

Re: Proposed Amendments to Participant-Level Disclosure
Ladies and Gentlemen:

Manning & Napier Advisors, Inc. appreciates the opportunity to submit comments
on the proposed regulations for Target Date fund participant-level disclosure. Manning &
Napier has managed assets to meet life cycle Objectives for over 35 years, through a
variety of market conditions including six bear markets. We currently manage over $38
billion, with over $16 billion in various target date or target tisk life cycle objectives
across different investment products. With this experience, we see first hand the important
role that life cycle investing plays in achieving retirement goals.

Manning & Napier’s approach to life cycle investing involves flexibility in
managing the glide path and underlying securities of a target date portfolio. Our long-
term investment performance demonstrates that being able to adjust the portfolio’s asset
allocation along the glide path to a given market environment can assist in appropriately
managing many of the risks inherently involved with investing retirement assets. In light
of the foregoing, Manning & Napier applauds the DOL’s desire to increase participant
awareness and understanding of Target Date funds. As discussed in more detail below,
we broadly support the concept that plan participants need additional, and more
transparent, information regarding Target Date funds. In sum, Manning & Napier:

strongly supports requiring prominent glide path disclosure for Target
Date funds; and : .

Investment Advisors Fof Over Thirty-Five Years



rebalancing within a fixed glide path. As we illustrate in the following two Tables, there is no
single glide path that holds the secret key to investment success in all market environments.

Table 1; Five Year Failure Rates of Various Asset Mixes

0/100 20/80 40/60. 80/20, 100/0

cent of Rolling 5-Year Periods

han

Source: Ibbotson; analysis by Manning & Napiar

Table 1 shows that asset allocations ranging from 100% intermediate government bonds
to 100% stocks have all failed to meet what many would call reasonable return expectations in at
least 20% of the rolling five-year periods since 1926. While the table also shows that higher
equity allocations generally result in higher average returns and lower rates of failure to achieve
target returns, Table 2 that follows shows that higher equity allocations also increase the risk of
capital losses over the short-to-intermediate term.

Table 2: Historical Frequency of Capital Loss for Various Asset Mixes

0/100

Rolling 1-Year F
| Rolling 9-Year Periods

‘Source: Ibbotson; analysis by Manning & Napier

As such, we believe that history has shown time and again that no single asset mix will be
able to meet both an investor’s long-term capital growth and capital preservation needs in all
environments. The data in Tables 1 and 2, as well as investor’s experiences over the last ten
years, show that actual risk/reward relationships can deviate widely from historical averages.


Manning & Napier manages the underlying investments in our target date funds as a
diversified, but unified portfolio built on a security-by-secutity basis given the risks and
opportunities in the current environment. This approach is distinct from a fund-of-fund approach
ofa collection of individual managers pursuing narrow mandates, which we believe makes total
portfolio coordination and adjustment to the changing environment more difficult as well as
raises the risk of over-diversification. We believe our approach provides advantages over the
fund-of-funds approach, and we would be concerned about placing restrictions on the nature of
underlying holdings that might preclude our unified portfolio approach.

Instead, we believe improvements can be made on the industry’s disclosure of the
investment approach taken with respect to selecting and monitoring underlying holdings,
including more disclosure and education regarding the total number of holdings to better inform
plan sponsors and participants as well as guard against investors paying active management fees
for these vehicles that are over-diversified and under-disclosed. Likewise, disclosure to plan
sponsors and participants regarding the fee structure of underlying investments in a fund-of-
funds environment can help them guard against biases in allocation decisions related to fee
differences among underlying funds,

In closing, we fee! that target date funds and related investment products, when selected
and managed appropriately, play an important role for plan sponsors helping participants meet
their retirement goals. Thank you again for giving Manning & Napier the opportunity to share
our perspectives,


For instance, requiring that a Target Date fund disclose the total number of underlying holdings
would help an investor understand how diversified, or potentially over-diversified, the Target
Date fund is.

Moreover, we feel it would be appropriate to require Target Date funds to look through
their fund holdings to the underlying portfolios when disclosing current asset allocations.
Simply relying on the fund holding level for asset allocation disclosure adds to the opaqueness
that the proposed rules are attempting to clarify.

In addition, as cited on page 54 of the proposal, we believe requiring the prospectus to
disclose past performance of asset allocation models utilized by the advisor to a Target Date fund
would provide crucial information to an investor regarding the advisor’s track record beyond the
particular Target Date fund — particularly given that many of the Target Date funds currently
being offered are relatively newer products.

Conclusion

In sum, Manning & Napier feels, and our long-term performance track record
demonstrates, that life cycle funds clearly offer a better solution than expecting individual
investors to navigate the markets themselves. Target Date fund investing plays a critical role in

- helping investors meet their retirement objectives and plan sponsors designing an appropriate

retirement plan menu.

Recent market events have demonstrated the important role that risk management plays
in managing life cycle funds. While Manning & Napier has had a long history of utilizing active
asset allocation in life cycle funds, a number of other fund families have utilized active asset
allocation as well. Most life cycle funds have been created after the 2000-2002 bear market, yet
before the 2007-2009 bear market, resulting in an important learning experience for many life
cycle fund managers. A number of newly released products that incorporate active asset
allocation have begun to enter the marketplace since last year, presumably in response to the
volatility of the markets in 2008. As such, it is critical that the proposed rules do not unduly
punish, even unintentionally, managers that have successfully utilized active asset allocation to
meet participant needs. We also feel that increasing the clarity and transparency of information
in disclosures for Target Date funds, both in marketing material and prospectuses, will be very
beneficial over the long run to the investing community.

Very truly yours,

Jeffrey S. Coons, Ph.D., CFA
President


& NAP ER. Independent Perspective | Real-World Solutions

May 21, 2012

Securities and Exchange Commission
100 F Street, NE

Washington, DC 20549

Attn: Elizabeth M. Murphy, Secretary

Re: _ File Number $7-12-10

Ladies and Gentlemen:

Manning & Napier Advisors, LLC appreciates the opportunity to submit additional
comments on the proposed regulations for target date fund marketing material in light of the SEC
sponsored Investor Testing Report (or “Report”). Manning & Napier has managed assets to meet
life cycle objectives for over 40 years through a variety of market conditions. As one of the
industry pioneers of life cycle investing, we share the Commission’s desire to promote better
investor understanding of their investments in target date funds.

We applaud the Commission for dedicating extensive time, research and resources to this
very important issue. As the Report indicates, many investors have misconceptions about key
target date features (Report slides 25, 28, 30, 53). We agree that effective and accurate investor
communications are an essential component of increasing investor understanding of target date
funds, As a panelist in the SEC-DOL Joint Roundtable of June 2009, we submitted written
testimony regarding a number of important investment considerations for target date funds. We
also submitted comments to the Commission in August 2010 related to proposed regulations for
target date fund marketing material. We have attached our August 2010 comment letter and 2009
written testimony as they continue to be relevant and corroborated by the Report. In addition to
those views, we respectfully submit two additional considerations as the Commission finalizes
the disclosure requirements:

1. Glide path illustrations improve investor understanding of the purpose of target date
funds.

As a professionally managed investment solution in a single fund, target date funds play
a critical role in helping investors meet their retirement goals. The Report validates our
experience that while target date funds are an appealing investment option to those
investors who do not have the time, knowledge or inclination to self-manage their
portfolio, they will not be an ideal solution for every investor (Report slides 38-41, 46).

1

Corporate Headquarters | 280 Woodeliff Drive | Fairport, NY 14450 | (685) 325-6880 phone | (800) 551-0224 toll free | www.manning-napier.com =~


Other Information

In addition to the glide path depiction and related information discussed above,
Manning & Napier feels that certain additional information is useful for participants
given the unique nature of a Target Date fund.

As most Target Date funds are fund-of-funds, Manning & Napier feels that
including additional information regarding the underlying securities would be very
helpful. For instance, requiring that a Target Date fund disclose the total number of
underlying security holdings would help an investor understand how diversified, or
potentially over-diversified, the Target Date fund is.

Finally, we believe requiring that a participant receive disclosure of past
performance of asset allocation models utilized by the advisor to a Target Date fund
would provide crucial information regarding the advisor’s track record beyond the
particular Target Date fund - especially given that many of the Target Date Funds
currently being offered are relatively newer products.

Conclusion

In sum, Manning & Napier feels, and our long-term performance track record
demonstrates, that life cycle funds clearly offer a better solution than expecting individual
investors to navigate the markets themselves, Target Date fund investing plays a critical
role in helping participants meet their retirement objectives.

Recent market events have demonstrated the important role that risk management
plays in managing life cycle funds. We feel that increasing the clarity and transparency
of information in disclosures for Target Date funds will be very beneficial over the long
run to plan participants.

Very truly yours,

Richard B. Yates
General Counsel


strongly supports requiring the disclosure of the assumptions that
underpin the glide path, including those through the target date of the
fund.

Requiring Glide Path Disclosure
7

We feel that the most effective method of providing relevant information to plan
participants considering an investment in a Target Date fund is to provide participants
with a communication that contains a clear depiction of the Target Date fund’s glide path,
As contained in our written testimony as a panelist at the SEC’s and DOL’s Joint Hearing
on Target Date Funds on June 18, 2009, Manning & Napier feels strongly that such a
glide path presentation should also describe any asset class ranges used by the Target
Date fund manager, in addition to fixed asset allocations since market and economic
conditions are constantly changing.

Following is an example of the Manning & Napier glide path (or “Glide Range”
as we refer to it given our active asset allocation along the glide path):

100%

Rano—>|
f Stock
xpasure

50%

| |

\ i

Retirement Retiremant Rotlremont Retlremotit Rotironient Retiroment
Taryot 2080 Taryot 2040 Taryot 2030 Taryot 2020 Targot 2010 Taryet Income.
70% = 89% stocks 70% - 86% sods 52% - BOM stacks 38M 60% Blocks 20% - 60% siocks 1% -96% stocks
For Investors
Planulng to 2046 + 2036 - 2045 2026 + 2035 2018 - 2025 2006-2015 before 2006
Rettre tn

We feel that the above table effectively communicates the key asset allocation ranges that
Manning & Napier uses in managing the Target Date fund throughout its life. Equally
important, the table demonstrates that the glide path continues to get more conservative
through the Target Date, continuing to show the asset allocation ranges to the participant,
communicates what asset allocation ranges will be used after the target date and at the
landing point to manage the underlying portfolio.

Manning & Napier feels that there is additional information regarding a glide
path’s underlying assumptions that can and should be described to participants in an
easy-to-understand format. Details regarding the significance of the Target Date itself,
and the frequency and amount of withdrawals by the participant after the Target Date are
key factors, Attached is one of our participant education pieces as an example of utilizing
both graphical and narrative descriptions of the glide path and its assumptions, including
an additional glide path that focuses solely on the retirement phase.


mannii

ADVISORS, INC.

June 18, 2009

MANNING & NAPIER’S WRITTEN SUBMISSION TO THE JOINT HEARING ON
TARGET DATE FUNDS

By: Jeffrey S$. Coons, Ph.D., CFA

We thank the Securities and Exchange Commission and Department of Labor for the
opportunity to provide written testimony for the Hearing on Target Date Funds and Similar
Investment Options. Manning & Napier Advisors is an $18 billion investment manager with
over 60% of our assets under management in target date or target risk life cycle mandates
spanning mutual funds, collective investment trusts and separate accounts. Manning & Napier
has managed assets to meet life cycle objectives for over 35 years, a time period that includes
five bear markets. As a firm that has specialized in life cycle management, we have seen first
hand the important role life cycle funds can play in achieving retirement goals when managed
appropriately.

The perspective we wish to bring to the panel is the importance of flexibility in managing
the glide path and underlying investments of a target date portfolio given the changing nature of
investment risk as market environments change. This perspective leads us to the conclusion that
increased transparency, disclosure and communication to plan fiduciaries and participants is a
more appropriate response to the concerns raised regarding target date fund performance than
invoking investment-related restrictions on the glide path or underlying investments of target
date funds.

To start, we believe there are three factors that need to be considered to set and adjust the
asset allocation of a target date fund over time:

1, The time horizon over which the risk of capital losses should be measured;
2. The level of withdrawals expected from the target date onward; and,
3. The market and economic environment.

Since market and economic conditions are constantly changing, we believe there is no
single, pre-arranged glide path that can meet the needs of participants in all environments.
Instead, as the target date for significant withdrawals from investor balances draws near, we
move an investor in a target date fund from more growth oriented target risk portfolios to more
conservative portfolios. Our general assumption is that at a fund’s target date an investor will


3uNSOdxA HOGS

Focusing on Your Retirement Years

Meeting Your Needs in Retirement

The benefits of investing in a Target Fund don’t stop at the target date; your account continues to be
professionally managed throughout your retirement years, During the Fund’s target year, the fund
manager seeks to balance your need for long-term growth with reducing your investment risk in
order to fund years of retirement income as well as address ‘on-golng withdrawals. Based on these
goals, the Fund's stock allocation will range from 20-60% in the target year.

Over the next five years, the Target Fund gradually moves to a lower range of stock exposure each
year until the portfollo reaches a stock range of 5-35%, as illustrated below. Continuing to dedicate a
portion of your portfollo to stocks during your early retirement years provides some growth potential
to help offset your periodic withdrawals.

At the Target Date and Beyond

20%

In tho sixth year following the target date, the target date fund will mirror the Target Income Fund and
have a primary goal of capital preservation. At this point and beyond, the Fund focuses on stability
but will maintain a limited range of stock exposure (5-35%) to allow for growth opportunities when
market conditions are favorable. The targot date fund will ullimately merge into the Target Income
Fund and continue to provide you with a professionally-managed, conservative investment option for
as long as you remain in the retirement plan.

For more information about any of the Target Funds, you may obtain a prospectus by visiting
www.manning-napler.com or by calling 1-800-466-3863. Before Investing, carefully consider the
objectives, risks, charges and expenses of the investment and read the prospectus caretully as It
contains this and other Information about the investment company.

Diversification does not assure a profit or protect against loss in a declining market. Because Target

The Manning & Napier Fund, Ine.

Funds invest in both stocks and bonds, the value of your investment will fluctuate in response to is managed by Manning & Napier
stock market movements and changes in interest rates. Invasting in Target Funds also involves a vale Hae Neier.
number of other tisks, including issuer-spacific risk, foreign investment tisk, and small-cap/mid-cap Inc., an ofliliate of Manning & Napier,

risk as the underlying Investments change over time, Principal value i not guaranteed at any time,
including at the target date.

is the distributer of the Fund shares.

UNUPPOUIR (5/10)


ve

MANNING
&

NAPIER. Independent Perspective | Real-World Solutions

July 9, 2012

Office of Regulations and Interpretations

Employee Benefits Security Administration, Room N-5655
US. Department of Labor

200 Constitution Avenue NW

Washington, DC 20210

Attn: RIN 1210-AB38; Target Date Disclosure

Ladies and Gentlemen:

Manning & Napier Advisors, LLC appreciates the opportunity to submit additional
comments on the proposed regulations for target date fund marketing material in light of the SEC
sponsored Investor Testing Report (or “Report”). Manning & Napier has managed assets to meet
life cycle objectives for over 40 years through a variety of market conditions. As one of the
industry pioneers of life cycle investing, we share the Department's desire to promote better
participant understanding of their investments in target date funds.

We applaud the Department for coordinating with the SEC to dedicate extensive time,
research and resources to this very important issue. As the Report indicates, many participants
have misconceptions about key target date features (Report slides 25, 28, 30, 53). We agree that
effective and accurate participant communications are an essential component of increasing
participant understanding of target date funds, As a panelist in the SEC-DOL Joint Roundtable of
June 2009, we submitted written testimony regarding a number of important investment
considerations for target date funds. We submitted comments to the Department in January 2011
and Commission in August 2010 related to proposed regulations for target date fund disclosures.
We also submitted additional comments to the Commission in May of this year. We have
attached our January 2011 comment letter to the Department as well as our recent comment letter
to the Commission as they continue to be relevant and corroborated by the Report. In addition to
those views, we respectfully submit two additional considerations as the Department finalizes the
disclosure requirements:

1. Glide path illustrations improve participant understanding of the purpose of target date

funds,

As a professionally managed investment solution in a single fund, target date funds play
a critical role in helping participants meet their retirement goals. The Report validates our
experience that while target date funds are an appealing investment option to those
participants who do not have the time, knowledge or inclination to self-manage their

1

Corporate Headquarters | 290 Woodcliff Drive | Fairport, NY 14450 I (585) 325-6880 phone | (800) 551-0224 toll ree | www.manning-napier.com ~~


will have the opportunity to engage in broader education efforts that will achieve the
Commission’s goal of improving investor understanding of target date funds.

As discussed in Item 1, above, investors may affirmatively choose to invest in a target
date option because they seek to delegate asset allocations decisions. For those investors,
managers must have the flexibility to provide the information that will best help investors
identify which target date option best achieves their retirement objective. In contrast,
other investors may be defaulted into the target date option as a result of their
participation in defined contribution plans with automatic enrollment features. With over
40% of plans utilizing automatic enrollment and target date funds accounting for over
50% of QDIA selections,’ managers must have flexibility to work with plan sponsors to
design participant education materials and strategies that best reflect the target date
manager’s investment approach, employer’s objectives and plan demographics.

For example, Manning & Napier’s investment philosophy is rooted in our belief that
active risk management is the best approach to achieving investor objectives. As such,
the glide path of our target date funds affords latitude to adjust asset allocation in
response to market environment changes. Our investor communications emphasize the
features of our funds that we think are most important to them: i) our target funds are
designed to provide a solution for investors who wish to delegate asset allocation
decisions and ii) the specified allocation ranges allow for active adjustment to manage
risk as market conditions change. We work closely with plan sponsors and their advisors
to address participant engagement holistically. A holistic approach to participant
engagement evaluates retirement plan design, investment menu design, participant
communications and participant education resources in tandem to meet the diverse needs
of participants. Such an approach helps engage plan participants who seek to better
understand investment options by reading participant communications as well as those
who do not. We have attached a sample defined contribution participant communication
piece as an example of our approach.

We strongly support a flexible regulatory framework that will stop short of limiting
investment or communication strategies that will enable us to continue our investor
engagement and education efforts.

* Cerulli Retirement Market Overview — 2010


Informed decision-making requires the investor to determine first, whether a target date
fund option is an appropriate investment solution given their goals. That is, before
delving into complex investment strategies, the investor must answer a fundamental
question: “Do I want to decide how to mix different types of investments to seek my
objectives or do I want to delegate those decisions to a professional?”

As the Report indicated, the decision to invest in a target date fund is often dictated by
whether the investor seeks to maintain or delegate control of asset allocation decisions.
A glide path illustration effectively and clearly communicates that the target date fund is
designed to provide a solution for investors opting to delegate asset allocation decisions.
We believe a glide path illustration is most likely to enhance investor understanding of
the purpose of the target date fund and assist investors in identifying whether a target date
fund is a suitable investment option to achieve their objectives, Furthermore, we strongly
discourage the use of “taglines” because of the undue emphasis the tagline places on the
allocation at the target date rather than communicating that the allocation shifts
throughout the life of the investor?

2. Accurate disclosure of target date glide path construction and asset allocation requires
flexibility.

We feel that the Commission’s final regulations should require managers to include a
glide path illustration in the disclosures. Furthermore, a manager should have flexibility
to disclose additional features of the fund glide path and asset allocation in a manner that
accurately communicates the manager’s investment approach. With flexibility, managers

1 The Report found that 83% of those who respondents who did not select a target date fund did
so because they wanted more control over their investment mix or preferred to create their own
mix of investments (Report slide 46).

? The Report supports our understanding that tagline requirements may mislead investors.
Although respondents reviewing documents with the tagline demonstrated highest
comprehension of investment allocation at the target date (Report slide 61), only 1% of
respondents viewing the tagline document correctly identified the post-target date stock
allocation, compared to 37% of those who viewed documents with glide path illustration only
(Report slide 62). In addition, tagline disclosures may have misled some respondents into
reporting an artificially high allocation of equities at the landing point (Report slide 62). Finally,
taglines did not appear to help survey respondents correctly answer questions about asset
allocation after the target date or asset allocation changes over time (Report slides 53, 56, $7).


MANNING & NAPIER FUND, INC. TARGET SERIES

Your Target Fund’s Path to Retirement

3YNSOdYG FOOLS

Your retirement plan offers you a choice of professtonally-managed target date funds to help keep
you on track for retirement, These funds are the Manning & Napier Fund, Inc, Target Serles (‘Target
Funds”). Each Target Fund is a fully diversified mlx of stocks, bonds and cash that adjusts over time to
meet your changing investment needs and manage Investment risk, The Funds follow a “glide path" to
gradually transition from more aggressive to more conservative investments as your target retirement
date moves closer.

The Target Funds’ Flexible Glide Path Focuses on Three Things:
Your Time to Retirement, Your Needs in Retirement, and Current Market Conditions.

As each Target Fund automatically becomes more conservative over time, a professional investment
team actively manages the Fund’s investments while keeping stock exposure to fevels appropriate for
your time horizon. The actual altocation to stocks within each Fund can vary and is determined not just
by time until the target date; It also takes Into account the risks and opportunities In the current market
environment, The Investment team employs ah approach that results In higher stock allocations when
markets are less expensive and lower stock allocations in high risk environments when markets are
more expensive,

Retirement Target Glide Path

YEARS TO TARGET DATE YEARS AFTER TARGET DATE

When you invest in one of your plan's Target Funds, you benefit from day-to-day professional
management as both your investment goals and the markets change over time. While there is no
guarantee that your Target Fund will never go down In value, the investment team continuously tracks
flnanclal Indicators, analyzes market trends and adjusts each Fund's investments to manage your
Investment risk and help you meet your retirement goals,


However, investors should understand that to a large extent, future returns are related to the
current market conditions.

Unfortunately, there are far too many examples of life cycle managers chasing after
market returns whether by adding risky investments like commodities and junk bonds following
strong short-term market returns or by selling those risky investments to buy Treasury securities
in the depth of the bear market for risky assets. In contrast to the “set it and forget it” approach
of rebalancing to a fixed glide path or the “buy high, sell low” approach of adding investments in
reaction to short-term market moves, Manning & Napier builds its fife cycle portfolios from the
bottom up with individual securities we believe are priced for a favorable risk/return trade off in
the current market environment. As the following table illustrates, Manning & Napier’s unique
approach to life cycle investing has helped our clients navigate these tough markets and achieve
positive absolute returns in what is shaping up to be a “lost decade” for many investors,

inning & Napier

Underlying Holding of:

(Allowable Equity 8

ased Fund
Manning & Napier Manning & Napier 28.9%
Pro-Mix Conservative Retirement Targat (5%-35%) 67.40%
Term Fund Income Fund
Manning & Napier Manning & Napier 51.7%
Pro-Mix Moderate Retirement Target (20%. 60% ) 59.34%
Term Fund 2010 Fund °
Manning & Napier Manning & Napier 65.7%
Pro-Mix Extended Retirement Target ( 40%-70% ) 61.24%
Term Fund 2020 Fund °
Manning & Napier Manning & Napier 91.9%
Pro-Mix Maximum Retirement Target (70%-95% ) 45.28%
Term Fund 2040 and 2050 Funds °
S&P 500 Index 100% -25.93%

NOTE: The above funds ate Collective Investment Trust Funds

No two target funds are alike. This fact is now well known, and it has actually been
identified as part of the “problem” with target date funds during the recent bear market. As plan
sponsors have had to select from a rapidly growing number of target date fund providers, so
much emphasis has been placed on the target date concepts (i.c., diversification and the existence
of a glide path), and not enough emphasis has been placed on understanding exactly how any
given fund family would approach the glide path and underlying investments.


required for all target date fund disclosures. We further encourage the Department to allow plan
fiduciaries flexibility in crafting participant disclosures that accurately communicate the fund
features and continue to encourage plan fiduciaries to engage in broader and innovative
participant education efforts.

Thank you for providing us an opportunity to comment on this very important issue.
Sincerely,

fo f{ (-———

Jeffrey 8. Coons, Ph.D., CFA
President



¢ does not support, and strongly disagrees with, requiring asset allocation
taglines in the name of a Target Date fund; and

¢ strongly supports requiring the disclosure of other underlying portfolio
information, such as'the number of underlying holdings and performance of
similar asset allocation models in either marketing material or the prospectus,

Manning & Napier feels that the above requirements will serve to improve disclosure and
increase the transparency of Target Date fund material for plan sponsors, plan participants and
individual investors, as well as decrease the risk of investor confusion.

Allowing Ranges and. iri i th Disclosure

We feel that the most effective method of providing relevant information to Target Date
fund investors is to require marketing material to contain the fund’s glide path. In our view, this
will provide plan sponsors and individual investors with the ability to compare the glide paths of
vatious Target Date fund offerings in a consistent manner. As contained in our written testimony
as a panelist at the SEC’s and DOL’s Joint Hearing on Target Date Funds on June 18, 2009,
Manning & Napier feels strongly that such asset allocation presentation should allow for ranges,
in addition to fixed asset allocations, because market and economic conditions are constantly
changing.

Following is an example of the Manning & Napier glide path (or “Glide Range” as we
refer to it given our active asset allocation approach):

Target
Yoors to Target Dats ‘YoRT Years Aftot Target Dato
peor aoyonts oye 2oyom o> toys An icons
100% —
Range =e
of Stock R on
Expostne
50% |
% Rotiroment Rotiremont Rottrement Rotirament Retirement Retirement
orget 2050 Taryet 2000 Taryst 2080 Target 2020 Target 2010 Targat Income
20% -95% sles 70% -88% slovks 52% 80% stacks 36% 6% checks 20% 60% SKS OY THN stock
For Investors .
Planing to 2046+ 2036 - 2045, 2028 - 2035 2016 - 2025 2006 - 2015 before 2008
Retire ti

We feel that the above table effectively communicates to any audience the key asset allocation
ranges that Manning & Napier uses in managing the Target Date fund throughout its life. Equally
important, the table communicates what asset allocation ranges will be used after the Target Date
and at the landing point to manage the underlying portfolio.


i
|

The following table” shows 2008 performance of different fixed income sectors:

BarCap US Credit TR USD -3.08%
BarCap US MBS TR USD 8.34%
BarCap US Government TR USD 12.39%
BarCap GBL Majors ex US TR USD 11.69%
Credit Suisse HY USD -26.17%

A review of the 31 Target 2010 mutual funds in 2008 shows a number of funds with
substantially similar equity allocations generated meaningfully different performance results. For
example, nine (9) Target 2010 funds with lower exposure to equities than the Manning & Napier
Retirement Target 2010 Fund? (50% in equities), underperformed the Manning & Napier
Retirement Target 2010 Fund, whose one year performance placed it 7" in this universe’.
Likewise, among the 23 Target Income funds in Morningstar as of 12/31/08, Manning &
Napier’s equity allocation ranked #16 (with 15 funds having a higher equity allocation), while its
performance ranked #2, indicating that a variety of factors can impact performance.

Secondly, strictly focusing on the asset allocation at the Target Date unduly ignores the
period following the Target Date by placing too much emphasis on the Target Date asset
allocation itself. Our research indicates that even for participants that have accumulated
significant wealth, as much as 2/3 of the earnings needed to fund retirement income are
attributed to investment earnings after retirement, Therefore, the post-Target Date asset
allocation ranges are extremely important for an investor to understand.

Third, given that a 401(k) plan menu typically uses a suite of Target Date funds from the
same fund family, requiring funds to include an asset allocation at the Target Date would result
in all of the Target Date funds’ taglines containing the same asset allocation (or range). In our
view, this would significantly increase the likelihood of investor confusion and be redundant
with the information more specifically provided in the Glide Path table.

Lastly, we feel that requiring the addition of an asset allocation tagline to the name as
proposed would be unduly burdensome on those fund families that use active asset allocation and
therefore would require an unwieldy display of ranges, rather than fixed asset allocations.

Other Information

In response to the SEC’s invitation on page 54 of the Proposal to consider requiring
additional information be disclosed, Manning & Napier feels that there are several other types of
information that would be very meaningful to investors.

As most Target Date funds are fund-of-funds, Manning & Napier feels that including
additional information regarding the underlying securities would be very helpful to plan
sponsors, participants and individual investors when making decisions about Target Date funds,

? Source: Morningstar Direct Database
3 Performance data for the Manning & Napier Retirement Target Collective Investment Trust Funds.
4 Performance information according to Morningstar.


a plan fiduciary to disclose additional features of the fund glide path and asset allocation
in a manner that accurately communicates the target date fund investment approach,
although the specific features will vary depending on the target date fund. With
flexibility, plan fiduciaries will have the opportunity to engage in broader education
efforts that will achieve the Department’s goal of improving participant understanding of
target date funds.

As discussed in Item 1, above, participants may affirmatively choose to invest in a target
date option because they seek to delegate asset allocations decisions, For those
participants, plan fiduciaries must have the flexibility to provide the information that will
best help participants identify which target date option best achieves their retirement
objective, In contrast, other participants may be defaulted into the target date option as a
result of their participation in defined contribution plans with automatic enrollment
features, With over 40% of plans utilizing automatic enrollment and target date funds
accounting for over 50% of QDIA selections,° plan fiduciaries must have flexibility to
design participant education materials and strategies that best reflect the target date
manager’s investment approach, employer’s objectives and plan demographics.

For example, Manning & Napier’s investment philosophy is rooted in our belief that
active risk management is the best approach to achieving participant objectives. As such,
the glide path of our target date funds affords latitude to adjust asset allocation in
response to market environment changes. Our participant communications emphasize the
features of our funds that we think are most important to them: i) our target funds are
designed to provide a solution for participants who wish to delegate asset allocation
decisions and ii) the specified allocation ranges allow for active adjustment to manage
risk as market conditions change. We work closely with plan sponsors and their advisors
to address participant engagement holistically. A holistic approach to participant
engagement evaluates retirement plan design, investment menu design, participant
communications and participant education resources in tandem to meet the diverse needs
of participants. Such an approach helps engage plan participants who seek to better
understand investment options by reading participant communications as well as those
who do not.

We strongly support a flexible regulatory framework that will stop short of limiting
investment or communication strategies that will enable us to continue our participant
engagement and education efforts.

In conclusion, Manning & Napier strongly supports the Department’s goal to improve
participant understanding of target date funds. We believe that a glide path illustration should be

3 Cerulli Retirement Market Overview — 2010


portfolio, they will not be an ideal solution for every participant (Report slides 38-41,
46).

Informed decision-making requires the participant to determine first, whether a target
date fund option is an appropriate investment solution given their goals. That is, before
delving into complex investment strategies, the participant must answer a fundamental
question: “Do I want to decide how to mix different types of investments to seek my
objectives or do I want to delegate those decisions to a professional?”

As the Report indicated, the decision to invest in a target date fund is often dictated by
whether the participant seeks to maintain or delegate control of asset allocation
decisions.' A glide path illustration effectively and clearly communicates that the target
date fund is designed to provide a solution for participants opting to delegate asset
allocation decisions. We agree with the Department that a glide path illustration is most
likely to enhance participant understanding of the purpose of the target date fund and
assist participants in identifying whether a target date fund is a suitable investment option
to achieve their objectives. We further agree with the Department that the Commission’s
proposed “tagline” should not be included in target date fund disclosures because of the
undue emphasis the tagline places on the allocation at the target date rather than
communicating that the allocation shifts throughout the life of the investor?

2. Disclosure requirements should provide plan fiduciaries guidelines, but also offer
flexibility to encourage plan fiduciaries to customize engagement efforts.

We feel that the Department’s final regulations should require plan fiduciaries to include
a glide path illustration in the disclosures. Furthermore, the Department should encourage

! The Report found that 83% of those respondents who did not select a target date fund did so
because they wanted more control over their investment mix or preferred to create their own mix
of investments (Report slide 46).

2 The Report supports our understanding that tagline requirements may mislead investors.
Although respondents reviewing documents with the tagline demonstrated highest
comprehension of investment allocation at the target date (Report slide 61), only 1% of
respondents viewing the tagline document correctly identified the post-target date stock
allocation, compared to 37% of those who viewed documents with glide path illustration only
(Report slide 62). In addition, tagline disclosures may have misled some respondents into
reporting an artificially high allocation of equities at the landing point (Report slide 62), Finally,
taglines did not appear to help survey respondents correctly answer questions about asset
allocation after the target date or asset allocation changes over time (Report slides 53, 56, 57).


In conclusion, Manning & Napier strongly supports the Commission’s goal to improve
investor understanding of target date funds. We believe that a glide path illustration should be
required for all target date fund disclosures. We further encourage the Commission to allow
managers flexibility in crafting fund marketing materials that accurately communicate the fund
features and continue to encourage managers to engage in broader and innovative investor

education efforts.
Thank you for providing us an opportunity to comment on this very important issue.
Sincerely,

Wotl—

Jeffrey S. Coons, Ph.D., CFA
President


We note that even at the landing point in our Glide Range, an asset allocation range is
still appropriate to allow for active risk management following the Target Date. Accordingly, in
addition to requiring the presentation of a Target Date fund’s glide path, we feel it is important
for there to be clarity in the regulations around the permissibility of ranges even at the landing
point of the Target Date fund (see page 44 of the Proposal referring to a fixed asset allocation at
the landing point). The following table demonstrates how Manning & Napier has utilized active
asset allocation in the Manning & Napier Retirement Target 2010 Fund! over time:

Historical Perspective on the Active Asset Allocation Decisions of the Retirement
Target 2010 Fund

; ae

re a
el ke

es :
a % : Ee 2 é

Pe
2000 2001 2002 2003 2004 2005 =. 2006 2007 2008 2008

Ree RSE

es

[= Actual Equity Allocation — MinimurvMaximum Equity Allocation Range * Midpoint

This chart demonstrates how an investment manager can limit equity exposure in high-
tisk environments, and increase equity exposure in order to participate in more favorable market
environments, As an example, we feel that the asset allocation of a Target Date fund should not
have been the same in January of 2000 (before the bursting of the technology stock bubble) with
extreme equity market valuations as in December 2002 (the bottom of that particular bear
market). A fixed asset allocation along the glide path results in reducing exposure to riskier
assets every year, even when those assets are priced for a better risk/reward tradeoff going
forward, We believe that a flexible glide path factoring in time, withdrawal needs and market
conditions allows the manager to balance the conflicting goals of managing capital risk, inflation
risk and longevity risk,

Fund Naming

Manning & Napier feels strongly that requiring funds to include their asset allocation at
the Target Date next to, or within, the name of the fund would not be helpful to investors for a
number of reasons.

First, strictly focusing on asset allocation risks an investor ignoring other important
investment factors that meaningfully contribute to the performance of a Target Date fund. For
instance, the type of fixed income securities held by a fund often plays a critical role in the
performance of a Target Date fund.

1 Asset allocation date for the Manning & Napier Retirement Target 2010 Collective Investment Trust Fund.

3