Successful Defined Contribution Investment Design
by Ying Gao, Stacy L. Schaus
Successful Defined Contribution Investment Design
- Acknowledgments
- Introduction
- PART ONE DC Plans: A Cornerstone of Retirement
- CHAPTER 1 DC Plans Today: An Overview of the Issues
- PREFACE: A CAREER AND A NEW FORM OF PENSION PLAN ARE BORN
- DC PLANS: BECOMING THE NEW REALITY . . . NO TURNING BACK
- SETTING GOALS FOR SUCCESS: INCOME REPLACEMENT TARGETS
- REDUCING DC LITIGATION RISK: PROCESS AND OVERSIGHT
- WHO’S A FIDUCIARY?
- HOW TO APPROACH OUTSOURCING DC PLAN RESOURCES
- HIRING AN INVESTMENT CONSULTANT
- GETTING STARTED: SETTING AN INVESTMENT PHILOSOPHY AND GOVERNANCE STRUCTURE
- PIMCO PRINCIPLES FOR DC PLAN SUCCESS: BUILDING AND PRESERVING PURCHASING POWER
- MAXIMIZING DC SAVINGS: JUST DO IT!
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- CHAPTER 2 Aligning DC Investment Design to Meet the PRICE of Retirement
- BEGIN WITH THE END IN MIND
- WHAT IS A REASONABLE PAY REPLACEMENT TARGET?
- CALCULATING THE INCOME REPLACEMENT RATES
- HISTORIC COST OF RETIREMENT: PRICE IS A MOVING TARGET
- A FOCUS ON INCOME, NOT COST
- PRICE-AWARE: APPLYING PRICE TO CONSIDER DC ASSETS AND TARGET-DATE STRATEGIES
- EVALUATING GLIDE PATHS
- TRACKING DC ACCOUNT BALANCE GROWTH RELATIVE TO PRICE
- SUMMARY: THE IMPORTANCE OF KNOWING YOUR PRICE
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- NOTE
- CHAPTER 3 Plan Investment Structure
- TIERS AND BLENDS: INVESTMENT CHOICES FOR DC PARTICIPANTS
- TIER I: “DO-IT-FOR-ME” ASSET ALLOCATION INVESTMENT STRATEGIES
- TIER II: “HELP-ME-DO-IT” STAND-ALONE OR “CORE” INVESTMENT OPTIONS
- TIER III: “DO-IT-MYSELF” MUTUAL-FUND-ONLY OR FULL BROKERAGE WINDOW
- CONSIDERING AN OUTSOURCED CHIEF INVESTMENT OFFICER
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- NOTES
- CHAPTER 4 Target-Date Design and Approaches
- TARGET-DATE STRUCTURES VARY BY PLAN SIZE
- CUSTOM TARGET-DATE STRATEGIES
- SEMICUSTOM TARGET-DATE
- PACKAGED TARGET-DATE
- TARGET-DATE SELECTION AND EVALUATION CRITERIA
- NO SUCH THING AS PASSIVE
- LOW COST AND LOW TRACKING ERROR DOES NOT EQUAL LOW RISK
- FRAMEWORK FOR SELECTING AND EVALUATING TARGET-DATE STRATEGIES: THREE ACTIVE DECISIONS PLAN SPONSORS MUST MAKE
- ACTIVE DECISION #1: HOW MUCH RISK CAN PLAN PARTICIPANTS TAKE?
- ACTIVE DECISION #2: HOW IS THE RISK BEST ALLOCATED ACROSS INVESTMENT CHOICES?
- ACTIVE DECISION #3: SHOULD RISK BE ACTIVELY HEDGED?
- TAIL-RISK HEDGING STRATEGIES
- INSURANCE
- TARGET-DATE ANALYTICS: GLIDE PATH ANALYZER (GPA) AND OTHER TOOLS
- GLOBAL DC PLANS: SIMILAR DESTINATIONS, DISTINCTLY DIFFERENT PATHS
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- NOTES
- CHAPTER 1 DC Plans Today: An Overview of the Issues
- PART TWO Building Robust Plans: Core Investment Offerings
- CHAPTER 5 Capital Preservation Strategies
- CAPITAL PRESERVATION: IMPORTANCE
- CAPITAL PRESERVATION: WHAT IS PREVALENT AND WHAT IS PREFERRED?
- THE $1 NAV: SHARED BY STABLE VALUE AND MMFs
- STABLE VALUE OFFERS MORE OPPORTUNITY IN A LOW-INTEREST-RATE ENVIRONMENT
- LOOKING FORWARD: THE CHANGING ROLE OF STABLE VALUE
- MAKING LOW-RISK DECISIONS: VIEWS FROM THE FIELD
- WHITE LABELING: A CAPITAL PRESERVATION SOLUTION
- AN ANALYTIC EVALUATION OF CAPITAL PRESERVATION SOLUTIONS
- SHORT-TERM, LOW-DURATION, AND LOW-RISK BOND STRATEGIES
- INCLUSION OF STABLE VALUE IN CUSTOM TARGET-DATE OR OTHER BLENDED STRATEGIES
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- NOTE
- CHAPTER 6 Fixed-Income Strategies
- WHAT ARE BONDS, AND WHY ARE THEY IMPORTANT FOR RETIREMENT INVESTORS?
- WHAT ARE THE DIFFERENT TYPES OF BONDS IN THE MARKET?
- WHAT TYPES OF BONDS SHOULD BE OFFERED TO DC PARTICIPANTS?
- INVESTMENT-GRADE AND HIGH-YIELD CREDIT
- BOND INVESTMENT STRATEGIES: PASSIVE VERSUS ACTIVE APPROACHES
- ANALYTIC EVALUATION: COMPARING BOND STRATEGIES
- OBSERVATIONS FOR FIXED INCOME ALLOCATION WITHIN TARGET-DATE STRATEGIES
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- CHAPTER 7 Designing Balanced DC Menus: Considering Equity Options
- WHAT ARE EQUITIES AND HOW ARE THEY PRESENTED IN DC INVESTMENT MENUS?
- GETTING THE MOST OUT OF EQUITIES
- CONSIDER DIVIDEND-PAYING STOCKS
- EVALUATING EQUITY STRATEGIES
- LESS IS MORE: STREAMLINING EQUITY CHOICES
- SHIFT TO ASSET-CLASS MENU MAY IMPROVE RETIREMENT OUTCOMES
- ACTIVE VERSUS PASSIVE—THE ONGOING DEBATE
- STRATEGIC BETA: CONSIDER ADDING FUNDAMENTALLY WEIGHTED EQUITY EXPOSURE
- CURRENCY HEDGING: AN ACTIVE DECISION
- OBSERVATIONS FOR EQUITY ALLOCATIONS WITHIN TARGET-DATE STRATEGIES
- IN CLOSING
- QUESTIONS FOR FIDUCIARIES
- NOTE
- CHAPTER 8 Inflation Protection
- WHAT IS INFLATION AND HOW IS IT MEASURED?
- WHY INFLATION PROTECTION IN DC?
- HISTORY OF INFLATION: INFLATION SPIKES UNDERSCORE NEED FOR INFLATION-HEDGING ASSETS
- INFLATION PROTECTION WHEN ACCUMULATING AND DECUMULATING, AND IN DIFFERENT ECONOMIC ENVIRONMENTS
- ECONOMIC ENVIRONMENTS CHANGE UNEXPECTEDLY—AND REWARD OR PUNISH VARIOUS ASSET CLASSES
- CONSULTANTS FAVOR TIPS, MULTI-REAL-ASSET STRATEGIES, REITS, AND COMMODITIES
- HOW SHOULD PLAN SPONSORS ADDRESS INFLATION RISK IN DC PORTFOLIOS?
- IMPLEMENTATION CHALLENGES
- EVALUATING REAL ASSET STRATEGIES
- SUMMARY COMPARISON OF INDIVIDUAL AND MULTI-REAL-ASSET BLENDS
- INFLATION-HEDGING ASSETS IN TARGET-DATE GLIDE PATHS
- OBSERVATIONS FOR INFLATION-HEDGING ASSETS IN TARGET-DATE GLIDE PATHS
- IN CLOSING
- QUESTIONS FOR FIDUCIARIES
- CHAPTER 9 Additional Strategies and Alternatives: Seeking Diversification and Return
- WHAT ARE ALTERNATIVE ASSETS?
- A WIDER LENS ON ALTERNATIVES
- CONSULTANT SUPPORT FOR ADDITIONAL STRATEGIES AND ALTERNATIVES
- BACK TO BASICS: WHY CONSIDER ALTERNATIVES?
- LIQUID ALTERNATIVES: TYPES AND SELECTION CONSIDERATIONS
- IMPORTANT CHARACTERISTICS IN SELECTING ALTERNATIVES: CONSULTANT VIEWS
- ILLIQUID ALTERNATIVES: TYPES AND CONSIDERATIONS
- CONTRASTING LIQUID ALTERNATIVE STRATEGIES WITH HEDGE FUND AND PRIVATE EQUITY INVESTMENTS
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- CHAPTER 5 Capital Preservation Strategies
- PART THREE Bringing It All Together: Creating Retirement Income
- CHAPTER 10 Retirement Income: Considering Options for Plan Sponsors and Retirees
- ADVISOR AND CONSULTANT RETIREMENT INCOME SUGGESTIONS
- WHY DON’T RETIREES LEAVE THEIR ASSETS IN DC PLANS AT RETIREMENT?
- RETAINING A RELATIONSHIP WITH YOUR EMPLOYER IN RETIREMENT: AN INNOVATIVE AND CARING PLAN SPONSOR
- MUTUAL BENEFITS: RETAINING RETIREE ASSETS MAY HELP BOTH RETIREES AND PLAN SPONSORS
- TURNING DC ASSETS INTO A LIFETIME PAYCHECK: EVALUATING THE DC INVESTMENT LINEUP FOR RETIREE READINESS
- EVALUATING PORTFOLIO LONGEVITY
- TURNING DEFINED CONTRIBUTION ASSETS INTO A LIFETIME INCOME STREAM: HOW TO EVALUATE INVESTMENT CHOICES FOR RETIREES
- GUARDING RETIREE ASSETS AGAINST A SUDDEN MARKET DOWNTURN: SEQUENCING RISK
- WAYS TO MANAGE MARKET AND LONGEVITY RISK . . . WITHOUT ADDING IN-PLAN INSURANCE PRODUCTS
- LIVING BEYOND 100: PLANNING FOR LONGEVITY
- MANAGING LONGEVITY RISK: CONSIDERATIONS FOR BUYING AN ANNUITY
- IMMEDIATE AND DEFERRED ANNUITIES: WHY OUT-OF-PLAN MAKES SENSE
- IN CLOSING
- QUESTIONS FOR PLAN FIDUCIARIES
- NOTES
- CHAPTER 11 A Global View: The Best Ideas from around the Globe for Improving Plan Design
- DC PLANS: BECOMING THE DOMINANT GLOBAL MODEL
- RETIREMENT PLAN COVERAGE AND PARTICIPATION
- INVESTMENT DEFAULT AND GROWTH OF TARGET-DATE STRATEGIES
- RETIREMENT INCOME: THE GLOBAL SEARCH FOR SOLUTIONS
- DEFINED AMBITION IN THE NETHERLANDS
- NEW SOLUTIONS IN AUSTRALIA AND BEYOND: TONTINES AND GROUP SELF-ANNUITIZATION
- “GETTING DC RIGHT”: LESSONS LEARNED IN CHAPTERS 1 THROUGH 10
- ANALYTIC FACTORS TO CONSIDER: SUMMARY BY ASSET PILLAR
- IN CLOSING
- NOTE
- CHAPTER 10 Retirement Income: Considering Options for Plan Sponsors and Retirees
- Closing Comments
- Index
- EULA
This book is dedicated to all of the plan sponsors and defined contribution professionals who inspire us with your commitment to improve retirement security; to my husband, John, and children, Robert and Julia, and to all of our families and yours.
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