Principal Financial Advisors, Inc. would like to make you aware of an important change to the underlying benchmark for the following portfolio:

  • Principal LDI Long Duration Separate Account

This benchmark change will bring further consistency across the actively-managed LDI Separate Account strategies and seek to further minimize the performance mismatch between pension assets and liabilities when investor sentiment turns decisively negative by focusing more on high quality corporate bonds and U.S. Treasury securities within the Separate Account.

What’s Changing

  • LDI Long Duration Separate Account – The benchmark for this investment strategy will change from the Bloomberg Barclays US Corporate Long A or Higher Index to the Bloomberg Barclays US Long Government/Corporate Index.

Note, the duration profile of the Separate Account will not change.

The benchmark change noted above will increase the government bond exposure in the portfolio, which typically should provide downside protection in a risk-off environment when corporate bond spreads widen and prices fall. The investment-grade rated corporate bond allocation is anticipated to continue to provide the asset support to help match pension liabilities.

The increase in government bond exposure should also increase the average credit quality of the LDI Long Duration Separate Account as the strategy seeks to match the average credit quality of its respective index.  The portfolio’s current BBB-rated securities (considered investment-grade rated) allocation ranges between 20% to 25% of the total portfolio assets.  The investment guidelines for the updated portfolio benchmark should limit the BBB-rated securities exposure to no more than +5% of its benchmark weight.

PM Change for the LDI Strategies

Beyond this recent benchmark change for the LDI Long Duration Separate Account, Principal Global Fixed Income announced a portfolio manager change for the LDI strategies.  Effective October 1, 2020, Tina Paris and Matt Minnetian will be named portfolio managers for the LDI Short Duration, LDI Intermediate Duration and LDI Long Duration Separate Accounts.  Principal Financial Advisors, Inc. approves of these changes.  We believe these changes bring another level of consistency across the management of the Separate Accounts.  No action is needed by you.  We just wanted you to know that as a co-fiduciary for the investment options used in your company’s retirement plan that Principal Financial Advisors has reviewed and approves of these changes.   Below are the bios for each of the new portfolio managers.

Tina Paris, CFA - Portfolio Manager

Tina is a portfolio manager at Principal Global Fixed Income. She leads its Long Duration and Liability Driven investment strategies, including the portfolio management and implementation of custom solutions. She is also responsible for the management of multi-sector portfolios including opportunistic strategies. Tina joined the firm in 2001 as a credit research associate before moving into her current position in 2004. She received an MBA with an emphasis in finance from the University of Iowa and a bachelor's degree in finance and economics from the University of Northern Iowa. Tina has earned the right to use the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Iowa.

Matthew Minnetian, CFA – Managing Director, Portfolio Manager

Matthew is a managing director and global head of investment grade credit at Principal Global Fixed Income and is responsible for investment grade credit portfolio management, research and trading. He also leads efforts to further integrate data science and quantitative tools into the fixed income investment management process. Prior to joining Principal, he was a portfolio manager at Alliance Bernstein Fixed Income for 19-years and most recently director of US investment grade credit. Portfolio responsibilities included total return, buy-maintain and insurance client strategies. At Alliance Bernstein, his responsibilities included applying a more systematic approach to their credit investing, working closely with the Quantitative Research team to leverage the firm’s technology innovations within fixed-income trading and research and apply them to portfolio management. He also established Alliance Bernstein’s financial hybrid business and co-managed their Global Financials Hybrid Strategy. Matthew has written numerous blogs on credit investing and market cycles. He holds a BA in economics and an MBA, both from Columbia University. He has earned the right to use the Chartered Financial Analyst designation and is a member of the CFA Institute.

Questions?

If you have any questions about these changes, your plan or what is occurring in the markets please contact your advisory associate at Principal Financial Advisors, Inc.

Sincerely,

Randy Welch
President, Principal Financial Advisors, Inc.

Before directing retirement funds to a separate account, investors should carefully consider the investment objectives, risks, charges and expenses of the separate account as well as their individual risk tolerance, time horizon and goals. For additional information contact us at 1-800-547-7754 or by visiting principal.com.

Principal Financial Advisors, Inc. is a registered investment adviser and member of Principal Global Investors. Principal Global Investors leads global asset management and is a member of the Principal Financial Group®.

Asset allocation strategies are developed using Separate Accounts available through a group annuity contract of Principal Life Insurance Company.  Asset allocation and diversification do not ensure a profit or protect against a loss.

Investing involves risk, including possible loss of principal.

Principal Life Insurance Company is the Investment Manager as defined by ERISA, with regard to the assets of the Separate Account. Fixed-income investment options (inclusive of U.S. Treasury Inflation-Protected Securities) are subject to interest rate risk, and their value will decline as interest rates rise. Neither the principal of the bond investment options nor their yields are guaranteed by the U.S. government or any other government entity.

Bloomberg Barclays US Long Corp A or Higher Index tracks the monthly total return of the Barclays Corporate Index with maturities greater than 10 years and a quality rating higher than A. The Barclays Corporate Index is a component of the Barclays U.S. Credit Index and consists of publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements.

Bloomberg Barclays US Long Government/Corporate Index tracks the total monthly return of the Bloomberg Barclays U.S. Long Government/Corporate Index. The Bloomberg Barclays U.S. Long Government/Corporate Index measures the performance of investment grade, US dollar-denominated, fixed-rate, taxable corporate and government-related debt whose maturity is 10 years or longer.

Separate Accounts are available through a group annuity contract with Principal Life Insurance Co. Insurance products and plan administrative services provided through Principal Life Insurance Company, a member of the Principal Financial Group, Des Moines, Iowa 50392. See the group annuity contract for the full name of the Separate Account. Certain investment options and contract riders may not be available in all states or U.S. commonwealths. Principal Life Insurance Company reserves the right to defer payments or transfers from Principal Life Separate Accounts as permitted by the group annuity contracts providing access to the Separate Accounts or as required by applicable law. Such deferment will be based on factors that may include situations such as: unstable or disorderly financial markets; investment conditions which do not allow for orderly investment transactions; or investment, liquidity, and other risks inherent in real estate (such as those associated with general and local economic conditions). If you elect to allocate funds to a Separate Account, you may not be able to immediately withdraw them.

Certain investment options and contract riders may not be available in all states or U.S. commonwealths.

October 2020 – 1352915-102022