US - Demand for custom target date funds among trustees of DC schemes in the US is on the rise, an influential survey of pension consultants showed.
Almost all (90%) of investment consultants interviewed by PIMCO for its fourth annual survey on trends in the DC market said they offered custom strategy advice.
Meanwhile, 82% said they could act as a fiduciary for their custom services, such as managing a plan's asset allocation.
Target date funds are tailored to an investor's planned retirement age. Over time, they automatically adjust their mix of stocks, bonds, and other holdings to create a risk profile, or glide path, appropriate to an investor's changing age.
As the funds tend to be the default option in 401(k) accounts, they tend to be the cornerstone of the US DC market.
Senior vice president and leader of PIMCO's Defined Contribution Practice Stacy Schaus said it wasn't surprising that consultants were supporting their clients in these strategies.
"Custom target strategies provide plan sponsors ultimate control of their DC plan, including best-in-class investment management, glide-path design flexibility, institutional pricing, as well as optimal fiduciary oversight and transparency," she said.
The survey also showed that consultants believe target-date strategies should be tailored to an organisation's demographics, which is currently not always the case.
Meanwhile, almost half of those interviewed, said existing glide paths are too aggressive, especially in light of how these strategies performed during the recent market crisis.
To mitigate risk, consultants suggest that plan sponsors add diversifying assets beginning with treasury-inflation protected securities (TIPS), which they also note as the most effective hedge against inflation.
The majority of consultants identified tactical asset allocation as a critical component of glide-path management.
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