New research from PIMCO says that the majority of consultants think plan sponsors should offer their 401(k) plan participants more target date or target risk strategies of the active management variety.
Specifically, the survey found that of the 51 consulting firms PIMCO surveyed, virtually all (98%) believe that sponsors should offer a target date or target risk investment tier. The vast majority (94%) believe it is important to actively manage these global asset allocation strategies, including guarding participants’ assets against a loss beyond their capacity – defined by consultants as no greater than 8% in any one year for those at retirement age.
The survey also revealed that consultants suggest using inflation-hedging assets such as Treasury Inflation-Protected Securities, a lower exposure to volatile assets and explicit tail-risk hedging strategies as ways to mitigate risk.
And consultants are anticipating a move away from recordkeeper’s proprietary products toward customized funds, particularly for plans over $500 million in assets.
“Consultants still clearly believe we face considerable global economic headwinds. In fact, nearly two-thirds of the consultants said they expect this low-return, high volatility environment to continue,” stated Stacy Schaus, executive vice president and PIMCO’s defined contribution practice leader.
The 51 consulting firms in the 2013 Defined Contribution Consulting Support and Trends Survey serve more than 6,600 clients with aggregate DC assets in excess of $2.4 trillion.