Active Management Rather Than Index-Tracking Preferred Investment Style
NEWPORT BEACH, CA–(Marketwired – Mar 23, 2015) – Retirement plan consultants say target-date funds should be structured to help workers meet their income objectives in retirement rather than be too focused on maximizing the size of their savings, according to the 9th Annual PIMCO Defined Contribution Consulting Support and Trends Survey released today by PIMCO, a leading global investment management firm and retirement solutions provider.
Of the 58 consulting firms surveyed, nearly all say it is important or very important to evaluate glide path structures, fees, diversification of underlying investments and the probability of meeting retirement income objectives, among other attributes, in target-date strategies that gradually become more conservative as an investor ages.
More than one-third (35%) of the consultants in the survey rank maximizing asset returns while minimizing volatility relative to the retirement liability as the most important objective when evaluating target-date glide paths. And 31% rank maximizing income replacement during retirement as the top goal for glide paths. None see maximizing expected retirement savings balances as the most important objective.
"Consultants increasingly want target date funds structured so they can meet an investor's income objectives when they retire," said Stacy Schaus, executive vice president and PIMCO's Defined Contribution Practice leader. "They clearly prefer strategies that will minimize the risk of a plan participant falling short when she retires." Schaus added: "For example, when evaluating income replacement distributions, the vast majority (85%) of consultants says that a tighter distribution, in which there is less risk but also less opportunity for future gains, is more attractive in the current environment."
Other key findings:
- Most consultants (93%) believe adding diversifying fixed income strategies is important or very important.
- More than two-thirds recommend retirement plans consider inflation protection securities to help safeguard participant assets.
- More than half recommend a multi-strategy liquid alternative be considered.
- Consultants surveyed strongly favor active management over index-tracking passive strategies as the preferred investment style when allocating to most asset classes, including bonds, emerging market equities and global asset-allocation strategies.
About the Survey
PIMCO's DC Practice prepares the 2015 Defined Contribution Consulting Support and Trends Survey to help plan sponsors understand the breadth of views and specific consulting services available within the DC marketplace. Our 2015 survey captures data, trends and opinions from 58 consulting firms across the U.S., which serve over 8,500 clients with aggregate DC assets in excess of $3.2 trillion.
For survey highlights or other PIMCO DC publications, please contact us at 888.845.5012 or email us at [email protected]
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