Investment Management

A Holistic Approach to Target Date Design

Executive Summary

    For plan participants, target date funds simplify the complex task of saving and investing for retirement by automatically allocating assets based on each individual’s age and retirement date. This simplicity can be powerful in a world of increasingly complex financial choices and explains why target date funds are expected to capture a significant amount of flows to defined contribution plans over the next five years.

    For plan sponsors, evaluating target date funds is anything but simple. Divergent investment methodologies across target date funds have delivered dramatically different results over time.

    As a result, it is critical for plan fiduciaries to understand these differences in order to select the fund that best matches the needs and characteristics of their plan and its participants.

    We believe this evaluation process should focus on four key components: Glide Path, Asset Allocation, Underlying Investment Managers and Portfolio Construction. Read our full brochure for a comprehensive approach to evaluating target date funds through the lens of these four key components.

A target date is the approximate date when investors plan to start withdrawing their money. Glide path refers to how a target date strategy's underlying asset mix (equities and bonds) changes over the life of the strategy, i.e. from the initial investment to the target date. Principal value fluctuates and there is no guarantee of value at any time, including the target date.