NEW YORK, June 22, 2015 /PRNewswire/
-- AllianceBernstein L.P. ("AB"), a leading global investment
management firm, released today its latest research, "Designing the
Future of Target-Date Funds: A New Blueprint for Improving
Retirement Outcomes." The research reveals that many of
today's target-date funds fail to incorporate institutional-quality
investment solutions and fiduciary best practices that are
commonplace across most large, professionally managed portfolios.
Despite the new tools available to target-date funds, most
retirement plans are still using traditional portfolio designs
developed years ago.
AB's research paper argues that target-date funds are becoming
the most critical pool of assets for meeting the retirement needs
of American workers. Over the last decade, new investment
tools have come to market that allow sponsors to incorporate an
improved glide path design with a broader set of asset classes,
dynamic allocation and a multi-manager or open architecture
structure—enhancements that may reduce risk and help build
retirement income. Despite the availability of these tools,
many target-date strategies typically use a single-manager
approach, focus only on stocks and bonds, have a limited static
allocation strategy, and stick entirely with active or passive
investing approaches rather than mixing the best of both.
This legacy approach of portfolio design could have fiduciary
implications, particularly in light of the U.S. Department of
Labor's (DOL) recent commentary in its "Tips for ERISA Plan
Fiduciaries," which noted that non-proprietary target-date funds
could offer advantages to plan participants by diversifying their
exposure to investment providers. The research stresses that plan
sponsors should look to adopt a broader range of available
investment strategies that can help reduce sensitivity to market,
interest-rate, inflation and longevity risks at different points in
the portfolio's glide path.
"While target-date fund assets have grown rapidly, innovation in
these funds' investment designs have occurred at a shockingly slow
pace," said Dan Loewy Chief
Investment Officer and Co-Head Multi Asset Solutions at AB.
"Our latest research creates a blueprint for target-date design
that provides plan sponsors with a clear roadmap for building
retirement income for the future. We're looking to provide a
target-date design of tomorrow that utilizes a multi manager, open
architecture structure, incorporates a broader collection of
diversifying assets and that can dynamically adjust the glide path
according to market conditions, tapping the best of active and
passive investment approaches to create better solutions for
participants' distribution phase."
AB's research paper reveals five key areas that will be crucial
for evolving the state of current target-date design:
- Moving from a single investment manager to a multi-manager, or
open-architecture, format that accesses best-of-breed managers and
reduces concentration risk.
- Diversifying the underlying investment mix from a traditional
stock/bond glide path to incorporate nontraditional asset
classes.
- Providing greater flexibility to respond to short-term market
fluctuations with a dynamic, rather than static, approach.
- Mixing active and passive investment strategies to enhance
risk-adjusted returns and manage costs.
- Calibrating the glide path to deliver better results in the
distribution phase of a retirement plan.
A full copy of AB's research paper, "Designing the Future of
Target-Date Funds," can be downloaded here.
About AB
AB is a leading global investment management firm that offers
high-quality research and diversified investment services to
institutional investors, individuals and private wealth clients in
major world markets.
As of March 31, 2015, AB Holding
owned approximately 36.8% of the issued and outstanding AB Units
and AXA, one of the largest global financial services
organizations, owned an approximate 62.7% economic interest in
AB.
Additional information about AB may be found on our website,
www.abglobal.com.
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SOURCE AllianceBernstein L.P.