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Plan News: UC Adds New Fund to Investment Lineup

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On July 31, 2013, the UC Retirement Savings Program will add the UC Short Term TIPS Fund as part of the Core Fund Menu for direct investment by participants. The new Fund will complement, but not replace, the existing UC TIPS Fund by offering participants another TIPS option that may provide additional protection against inflation.

Also effective June 30, 2013, the UC Short Term TIPS Fund became the TIPS allocation within the UC Pathway Fund series, replacing investment in the existing UC TIPS Fund.

TIPS can play a valuable role in a well-balanced portfolio by helping to hedge inflation and diversify your assets. The UC Short Term TIPS Fund was developed for investors seeking inflation protection with the potential for less volatility than other inflation hedges, including stocks, longer term TIPS, gold, and Real Estate Investment Trusts.

The fund’s benchmark and duration

The new UC Short Term TIPS Fund will strive to match the duration of its benchmark, the Barclays 1-3 year US TIPS index2, which has an average duration of 2.2 years. In comparison, UC’s longer-term TIPS fund, the UC TIPS Fund, has an average duration of 7.8 years.

Generally, knowing the duration of a bond is key to estimating how much the value of a bond will fluctuate in response to a given change in interest rates. For every one year of duration, a bond fund should be expected to decrease 1% in value when interest rates rise 1% and increase 1% in value when interest rates fall 1%. So a hypothetical bond investment with a duration of six years would be expected to decrease in value by 6% if interest rates rise 1% and increase 6% if interest rates fall 1%. Other factors also can influence a bond fund’s performance and share price. Accordingly, a bond fund’s actual performance may differ from this example.

How duration affects your investment

The new Fund’s shorter duration may reduce the magnitude by which interest-rate changes will affect the new Fund’s share price, but may also reduce its potential total returns when compared to its longer-duration counterpart.

Any time you’re considering a TIPS fund (or any investment), it’s a good idea to look at all your investments. If you have a shorter investment time horizon or seek less exposure to the potential gains and losses associated with interest rate movement, you might find the UC Short Term TIPS Fund a better fit for your portfolio than the longer-duration UC TIPS Fund.

Operational notice

The addition of the new UC Short Term TIPS Fund will require changing the operational fund code for the UC TIPS Fund. If you currently are invested in the existing UC TIPS Fund, you will see what appears to be an exchange on your June 30, 2013, statement. This exchange is not an actual movement of money and does not affect the value of your investment. It was done only to assign the new fund code to the existing UC TIPS Fund.
 
In addition, if you currently use the automatic rebalance feature offered through your plan, you may need to adjust your settings in NetBenefits due to the change in fund code.

Where to find more details

If you would like to invest in the new UC Short Term TIPS Fund, please contact Fidelity by calling toll-free at 1-866-682-7787, Monday through Friday (excluding New York Stock Exchange holidays) between 5:30 a.m. - 5:00 p.m. Pacific Time to speak with a service center representative. Alternatively, under My Account, click Request Investment Changes.

 

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Before investing in any investment option, please carefully consider the investment objectives, risks, charges and expenses. This and other information on the UC Core Funds is available, free of charge, online at www.ucfocusonyourfuture.com or by calling Fidelity® Retirement Services at 1-866-6UC-RSVP (1-866-682-7787). This and other information on mutual fund options that are part of the UC Core Funds line up and other mutual funds outside the UC Core Fund line up can be found in each mutual fund’s prospectus, which can be obtained, free of charge, at the same website and toll-free phone number. Read the information carefully before you invest.

1 The Consumer Price Index is an index of the variation in prices paid by typical consumers for retail goods and other items.
2 The Barclays 1-3 year US TIPS index measures the performance of U.S. Treasury securities that have a remaining maturity of at least one year and less than three years.

Increases in real interest rates can cause the price of inflation-protected debt securities to decrease.

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Fidelity Brokerage Services LLC, member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
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