Investment Management

Target Solution Trust

Philosophy

We believe target-date strategies should reflect the prevailing behavior and risk appetite of the average participant and be consistent with capital market realities. We believe early-career participants warrant high equity allocations in order to maximize wealth accumulation and capitalize on long recovery times if market declines occur. The average participant's risk aversion rises dramatically as retirement approaches when accumulated wealth is the greatest. This calls for risk management that minimizes the probability of large losses near retirement and gives participants the freedom to choose their future path. These beliefs translate into a glide path that reaches its final asset allocation at retirement and employs multiple risk mitigation techniques in the final years.

Process

We believe active asset allocation coupled with a disciplined manager selection and monitoring process provides better risk-adjusted return potential than a diversified but unmanaged approach. Short-term volatility is controlled through broad capital market diversification and tactical asset allocation. The asset allocation process reflects our current expectations about future returns, risks and potential market interactions. Active manager selection and monitoring within each asset class provides additional return potential over time and eliminates single manager risk. Passive management complements the actively managed strategies with broad-based market exposures at low cost. Voya Target Solution Trust Series strategies strategically combine proprietary and sub-advised third-party managed strategies by evaluating the risk/return characteristics, relative performance, volatility, and cross correlation of the broad universe of underlying strategies to construct optimal portfolios. Through diversification of alpha sources and investment styles, the portfolios are designed to reduce risk and generate consistent long-term returns.

Competitive Advantage

  • Open Architecture. Voya is one of only a few target-date providers to employ nonproprietary managers within our off-the-shelf target-date portfolios. We believe this is consistent with prevailing best practices in the management of defined benefit and defined contribution retirement plans.
  • Broad Diversification. We invest in a broad range of traditional and alternative asset classes to provide broad diversification, global market exposure and access to alpha opportunities across capitalizations, styles and regions.
  • Participant-Centric Glide Path Approach. We believe the best approach to glide path design is to maximize wealth accumulation early in a participant’s career and have an accelerated reduction of equity in the years immediately before retirement to limit the potential for significant losses.
  • Blend of Active and Passive. We utilize a mix of active and passive strategies which allows us to draw on the alpha generating potential of proven institutional asset managers and deliver a robust product at an institutionally attractive fee level.

Principal Risks

The Target Solution Trust principal risks are generally those attributable to investing in stocks, bonds and related derivative instruments. Target Solution Trust holdings are subject to market, issuer and other risks, and their values may fluctuate. Market risk is the risk that securities or other instruments may decline in value due to factors affecting the securities markets or particular industries. Issuer risk is the risk that the value of a security or instrument may decline for reasons specific to the issuer, such as changes in its financial condition. Additionally, the concentration of Target Solution Trust holdings may lead to high volatility and tracking error relative to the benchmark. Furthermore, there is the risk that needed hedges may not always be available in the derivatives markets or available at attractive prices. In addition, because each Target Solution Trust is exposed to underlying collective funds, the performance of these investment vehicles will have a substantial impact on the Target Solution Trust’s overall performance, and such investment vehicles may have unique risks based on their strategy and operations. Certain underlying investment vehicles may not offer daily liquidity. The Target Solution Trust may also incur fees attributable to such underlying pooled investment vehicles. In some situations, fees paid from these investment vehicles to affiliates of the Trustee may be offset or rebated vis-à-vis the Trust or its investors.
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