Performance dynamics are driving fiduciaries to multimanager target-date funds
As portfolio management has become increasingly specialized, no single investment firm can expect to excel in every asset category needed for a truly diversified portfolio. This goes for target-date funds, too, according to survey respondents. Fiduciaries directing plan participants to target-date funds dominated by manager concentration risk need to see our survey findings now.
In a recent survey of nearly 500 consultants, sponsors, and elite retirement plan advisors, the majority now prefers open-architecture, or multimanager, target-date funds. This portends a significant shift in plan design, given that less than a third of target-date funds employ an open-architecture approach today.
Performance is the driving factor: Seven of 10 respondents who now use multimanager target-date funds do so because they believe these open-architecture structures offer the potential for better risk-adjusted returns.
How do you define open architecture? Six in 10 surveyed insist that at least half of the underlying assets in a multimanager target-date fund must be run by unaffiliated managers.
by Todd J. Cassler President of Financial Institutions and Advisory Solutions John Hancock Investments
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