401(k) Consultants Say Target-Date Review Tops Plan Sponsor Priority List

Consultants predominately recommend target-date funds that blend active and passive strategies

Newport Beach, California, UNITED STATES

NEWPORT BEACH, Calif., April 17, 2017 (GLOBE NEWSWIRE) -- Retirement plan consultants list reviewing target-date strategies as the top priority for their plan sponsor clients, according to the 11th annual PIMCO Defined Contribution Consulting Support and Trends Survey published by PIMCO, a leading global investment management firm.

More than three-quarters (77%) of the 69 consultants surveyed said target-date fund reviews are the top priority over the next year for their plan sponsors clients, closely followed by an evaluation of investment fees (73%). The consultants participating in the survey advise over 12,000 plan sponsors with over $4 trillion in cumulative defined contribution assets.

Target-date funds are retirement portfolios that automatically adjust the allocation to lower risk as the participant ages. 

Nearly all (97%) of consultants recommend target-date funds as the qualified investment default alternative (QDIA).

The largest percentage of consultants recommend plans with less than $1 billion in assets select a packaged active/passive blend fund when choosing target-date strategies. For larger plans, nearly half of the consultants (48%) recommend custom target-date strategies that enable tailoring of both the glide path and the investment manager line up, while just over a quarter (27%) recommend packaged active/passive funds even for these mega plans.

Assets in custom target-date strategies continue to grow, with consultants reporting nearly $200B in custom target-date AUM. At the median, consultants expect an additional 10% of clients to implement these strategies in the next 3 years.

“Nearly all consultants (98%) recommend that plan sponsors consider a target-date fund’s glide path as the most important factor in evaluating and selecting an investment default strategy,” said Stacy Schaus, Executive Vice President and author of the survey.  “Consultants also note fees as an important consideration, which helps explain broad support for active and passive blend target-date strategies.”

Other findings:

  • The vast majority of consultants view active management as an important or very important investment approach for emerging market equity (94%), non-U.S. bonds (92%), U.S. bonds (88%), infrastructure/MLPs (87%), U.S. small cap equity (82%) and non-U.S. developed market equity (82%).
  • Nearly all consultants (97%) recommend core or core plus fixed income as a stand-alone core investment option, with the majority also supporting a second core bond choice such as a foreign or global fixed income or a multi-sector bond fund.
  • Most consultants (92%) recommend including one inflation-protection option in the core lineup, up from 84% in 2016. The top recommended stand-alone strategies in inflation-protection include inflation-linked bonds/TIPS (66%), multi-real asset strategies (55%) and REITs (50%).
  • Consultants recommend stable value strategies over all other capital preservation alternatives, with 94% of respondents believing clients are very likely or likely to switch to stable value when seeking an alternative to money market funds.

About the Survey
PIMCO’s DC Practice has prepared the 11th annual Defined Contribution Consulting Support and Trends Survey to help plan sponsors understand the breadth of views and consulting services available within the defined contribution retirement market. Our 2017 survey captures data, trends and opinions from 69 U.S. consulting firms, which serve over 12,000 clients with aggregate DC assets in excess of $4.0 trillion.

About PIMCO 
PIMCO is a leading global investment management firm, with offices in 11 countries throughout North America, Europe and Asia. Founded in 1971, PIMCO offers a wide range of innovative solutions to help millions of investors worldwide meet their needs. Our goal is to provide attractive returns while maintaining a strong culture of risk management and long-term discipline. PIMCO is owned by Allianz S.E., a leading global diversified financial services provider.

All investments contain risk and may lose value. Investors should consult their investment professional prior to making an investment decision.

The survey results contain the opinions of the respondents at the time of the survey and may not reflect current opinions or investment strategies. These results may or may not match the views of PIMCO and are not intended to be reflective of PIMCO’s opinions on the market or any particular investment style or strategy. This material is distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

Except for the historical information and discussions contained herein, statements contained in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the performance of financial markets, the investment performance of PIMCO's sponsored investment products and separately managed accounts, general economic conditions, future acquisitions, competitive conditions and government regulations, including changes in tax laws. Readers should carefully consider such factors. Further, such forward-looking statements speak only on the date at which such statements are made. PIMCO undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.  


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