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Asset allocation update

The target date portfolio management team reviews strategic allocations throughout the year to help ensure the portfolios are well-positioned amid ever-changing market conditions. And we usually make changes when we conduct the annual aging of the glidepath – which is happening now. Based on our recent review, we’ve decided to make changes that seek to:

  • Reduce expected volatility and improve risk and reward profiles for investors
  • Manage risk consistent with market outlook
  • Add greater potential for excess performance

What’s changing?

Adjusting High Yield exposure

We’ve historically utilized the Principal Global Diversified Income Fund as a high yield proxy within the near term dated vintages and dedicated high yield exposure, through the Principal High Yield I Fund, within the later term vintages. We’d prefer a higher concentration of dedicated High Yield exposure across the glide path, so we’re eliminating our allocations to the Principal Global Diversified Income Fund within the Principal LifeTime portfolios and Principal LifeTime Hybrid portfolios.

These adjustments will likely allow us to keep duration under control while still meeting investor’s income needs. Assets allocated to the Principal Diversified Income Fund will be reallocated to the Principal High Yield I Fund.

Change specific to Principal LifeTime portfolios: Improving consistency between the U.S. & Non-U.S. Equity portfolio

With a clear vision between our U.S. & Non-U.S. equity asset classes, the Principal LifeTime portfolios are eliminating exposure to the Principal Global Opportunities Fund managed by Principal Global Investors.

Currently the Principal LifeTime portfolios have a relatively small allocation to the Global Opportunities Fund within the near term dated vintages. Given the global nature of this strategy, assets will transfer to the existing U.S. and non-U.S. strategies on a pro rata basis according to newly established allocations.

Impact

These changes will be completed in the coming months. Impact to total investment expenses is expected to be minimal. Please contact your Principal® representative with any questions.

About target date investment options

Target date portfolios are managed toward a particular target date, or the approximate date the investor is expected to start withdrawing money from the portfolio. As each target date portfolio approaches its target date, the investment mix becomes more conservative by increasing exposure to generally more conservative investments and reducing exposure to typically more aggressive investments. Neither the principal nor the underlying assets of target date portfolios are guaranteed at any time, including the target date. Investment risk remains at all times. Asset allocation and diversification do not ensure a profit or protect against a loss. Be sure to see the relevant prospectus or offering document for full discussion of a target date investment option, including determination of when the portfolio achieves its most conservative allocation.

Important information

Carefully consider the Fund’s objectives, risks, charges and expenses. Contact your financial professional or visit principal.com for a prospectus, or summary prospectus if available, containing this and other information. Please read it carefully before investing.

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 800-547-7754 or by visiting principal.com.

The Principal LifeTime Hybrid Collective Investment Funds (CITs) are collective investment trusts maintained by Principal Global Investors Trust Company, (the Trust Company). The Trust Company has retained Principal Global Investors, LLC, doing business as Principal Portfolio Strategies (the Adviser), to serve as investment adviser with respect to the CITs, subject to the Trust Company's supervision and review. The Adviser is an indirect wholly owned subsidiary of Principal Financial Group, Inc., and is under common control with the Trust Company. The Adviser also manages portfolios which may be included as underlying investments in the CITs. The Adviser receives management fees from these portfolios. The Adviser or other affiliates of the Trust Company may provide services to the CITs and may receive fees for such services. The CITs are available only to certain qualified retirement plans and governmental 457(b) plans.

Investing involves risk, including possible loss of principal.

Asset allocation and diversification does not ensure a profit or protect against a loss. Equity investment options involve greater risk, including heightened volatility, than fixed income investment options. Fixed income investments are subject to interest rate risk; as interest rates rise their value will decline. International and global investing involves greater risks such as currency fluctuations, political/social instability and differing accounting standards.

There is no guarantee that a target date investment will provide adequate income at or through retirement.

Fixed income investments (inclusive of U.S. Treasury Inflation- Protected Securities) are subject to interest rate risk; as interest rates rise their value will decline. The U.S. government does not guarantee the principal or coupon payments of non-U.S. Treasury bonds.

Investments in natural resource industries can be affected by disease, embargoes, international/political/economic developments, variations in the commodities markets/weather and other factors. Investing in derivatives entails specific risks regarding liquidity, leverage and credit that may reduce returns and/or increase volatility.

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment or accounting obligations and requirements.

Investment manager/sub-advisor means either the Investment Adviser or Sub-Advisor to the investment option or the underlying asset(s). Principal Life Insurance Company is the Investment Manager as defined by ERISA, with regard to the assets of the Separate Accounts. The trustee of any Collective Investment Trust is the Investment Manager as defined by ERISA, with regard to the assets of the CIT.

Insurance products and plan administrative services provided through Principal Life Insurance Co. Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, Principal Funds Distributor, Inc. and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392. Certain investment options and contract riders may not be available in all states or U.S. commonwealths. Separate Accounts are available through a group annuity contract with Principal Life Insurance Company. See the group annuity contract for the full name of the Separate Account. 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.

May lose value. Not a deposit. No bank or credit union guarantee. Not insured by any Federal government agency.

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