1 / 7

More participants than ever are turning to target-date funds

More participants than ever are turning to target-date funds.

unity
Download Presentation

More participants than ever are turning to target-date funds

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. More participants than ever are turning to target-date funds Sources: PIMCO, Morningstar, The Cerulli Edge, U.S. Asset Management Edition (August 2011). Target-date funds are designed to provide investors with a comprehensive retirement solution tailored to the time when they expect to retire and plan to start withdrawing the money (the “target date”). Each fund follows a target asset allocation schedule that changes over time to help reduce portfolio risk, increasing its exposure to conservative investments as the target date approaches. Principal value of the funds is not guaranteed at any time, including the target date. Target-date assets in DC plans 2005-2015 Projected 1,265 Assets in billions 645 329 236 172 64 1

  2. Target Date Funds Risk – Equity Glide Path Allocations

  3. Target Date Funds Asset composition

  4. Target Date Funds 3 year Sharpe Ratio comparisons

  5. Target Date Funds 3 year return comparisons

  6. Target Date Funds 3 year Standard Deviation comparisons

  7. Target Date Funds Considerations for Fiduciaries • Demographics of your plan – average age at retirement • Does the plan offer an in-plan retirement income solution? • Do participants typically take distributions from the plan within a short window of retirement? (Most do!) • Which risk allocation is most appropriate for both plan fiduciaries and participants? • What is the upside to having higher risk profiles at retirement – if participants are going to leave the plan shortly after? • What is the composition of the underlying portfolios – are they constructed in a manner that is consistent with “prudent investors” and institutional investors? • Are there legitimate inflation hedging vehicles in the construction of the fund? • Fees of the underlying options and the overall target date solutions • Procedural Prudence vs. Substantive Prudence – Fiduciaries have a duty of care to participants – not to engage in herding • Does your TDF evaluation process rely solely on historical returns? Many score-card systems have an overweight to return data • Consider addressing TDF and QDIA specifically in the investment policy statement • Consider an RFP specific to the QDIA

More Related