Hitting the Target
Are you doing enough investigation into the assumptions and risks of your plan’s target-date funds (TDFs)? Concerned that plan sponsors weren’t looking into these adequately, the DOL published tips in 2013. The bottom line? The DOL expects plan fiduciaries to go over a series of factors before selecting the glidepath that’s right for the plan. Through our TDF selection process, we’ll work with you to review the relevant factors for the right fit.
Asset allocation and TDFs create additional performance monitoring challenges because a fund’s name may not convey the level of risk that is imbedded in a fund’s approach. For example, one 2020 TDF fund may have 35 percent in equites while another 2020 TDF may have 70 percent in equities. As a result, comparisons that are based on the year in a fund’s name can be very misleading. To overcome the problem, we utilize returns-based style analysis across four major asset classes (U.S. Equity, Non U.S. Equity, Fixed Income and Cash) to create a custom benchmark index for each TDF in a TDF series. We also create a custom, risk-based peer group for each TDF in order to evaluate a portfolio’s value-added relative to other asset allocation portfolios that have demonstrated similar levels of risk. Finally, because a TDF is constructed using underlying funds that focus on a particular area of the market, we score the performance of the component funds using our individual fund scoring approaches.
Asset allocation does not protect against loss of principal due to market fluctuations. It is a method used to help manage investment risk.
The target date is the approximate date when investors plan on withdrawing their money. Generally, the asset allocation of each fund will change on an annual basis with the asset allocation becoming more conservative as the fund nears target retirement date. The principal value of the funds is not guaranteed at any time including at and after the target date.
*Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affilate of Kestra IS. Kestra IS and Kestra AS are not affiliated with Mel Foster Insurance Company or any entity referenced herein. This site is published for residents of the United States only. Registered Representatives of Kestra Investment Services, LLC and Investment Advisor Representatives of Kestra Advisory Services, LLC, may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed. Not all of the products and services referenced on this site are available in every state and through every representative or advisor listed. Neither Kestra IS or Kestra AS provides legal or tax advice. For additional information, please contact our Compliance department at 844-5-KESTRA (844-553-7872).