We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".

Continue

Features

Twitter board

Follow us
  • To read LGIM's take on alternative credit click here: https://t.co/UeMKBQuKmd https://t.co/HqpKasST687 days ago
  • Climate change, #MeToo, plastics: ESG in 2019 might sound like a repeat of last year but that is where the similari… https://t.co/JfbVlSHXvs8 days ago
  • Have you seen our latest property roundtable? Click here to read more: https://t.co/Brd4QkMsNk https://t.co/EleMsa1HZz35 days ago
  • Has the direct lending market become a victim of its own success? Read more here: https://t.co/55jXOQqnCr… https://t.co/3rDYQhcbgX38 days ago
  • Have you seen our latest roundtable? An investor sits down with fund managers and advisers to discuss real estate's… https://t.co/DZqJFjnCxP43 days ago
  • Decision-makers at key pension schemes share their views with Mona Dohle on how to pick the right manager and wheth… https://t.co/ZGCHhJMJCu45 days ago
  • Read our latest interview with Mark Mansley, chief investment officer of Brunel Pensions Partnership here:… https://t.co/0fKgRopmsW52 days ago
  • "ESG is a hot topic among investors, but it appears that trustees are yet to catch on. Mark Dunne takes a look at t… https://t.co/pKGoquOCMk58 days ago
  • "@BNPPAM_COM is launching a sustainable SME funding strategy to boost the economy and help investors escape the low… https://t.co/clDIoHPo6P64 days ago
  • "Pension funds, as long-term investors, could find themselves exposed under many of the potential future scenarios… https://t.co/d37su2PwsD65 days ago
  • As LDI strategies are gradually being replaced by CDI approaches, how are pension schemes managing the additional r… https://t.co/rlMnrBmr1d66 days ago
  • Emerging market debt is rapidly becoming a local currency market, but investors are still nervous about a US rate r… https://t.co/3coGF5Dq8n77 days ago
  • Have you seen our latest roundtable? We brought fund managers, consultants and trustees together to discuss emergin… https://t.co/BMLta4c9pm80 days ago
  • Does the turbulence hitting stock markets at a time of rising bond prices mean it is time to ditch multi-asset fund… https://t.co/GiSdFpE01N86 days ago
  • More and more pension schemes are increasing their allocations to private equity, but will the illiquid strategy br… https://t.co/8l8TI75r9v92 days ago
  • Border to Coast Pensions Partnership CEO Rachel Elwell tells Mona Dohle about the challenge of developing a common… https://t.co/nQZfFveQdz93 days ago
  • Out now- The portfolio institutional October issue featuring our cover on ESG and fixed income: Breaking new ground… https://t.co/hnmwYclXS594 days ago
  • Friday View: ESG in fixed income: The new frontier - LGPS bolster infrastructure collaboration - EM Roundtable: The… https://t.co/zxvEKaZkoM97 days ago
  • Local government pension scheme (LGPS) pool Border to Coast has appointed the first external managers for its £1.2b… https://t.co/eBAbx0ubzJ97 days ago
  • "Investors seduced by the impressive growth forecasts for emerging market economies should prepare themselves for a… https://t.co/7nAnrL8s7t98 days ago

Strategy

Set and forget

Set and forget

Mark Dunne
Tuesday 23rd January 2018

Target date funds are designed to take the stress out of retirement planning, but they have their critics. Stephanie Hawthorne examines the pros and cons.

“The TDF provider is unlikely to be the best-in-class manager for all asset classes and so investment performance may be inferior compared to a fund made up of the best-in-class managers.”

Niall Alexander, PSolve

The latest American import into the United Kingdom is not another fast food chain but an intriguing investment strategy. Target date funds (TDFs) have arrived to provide savers with an automated, age-based retirement plan.

The idea is that an individual in a defined contribution fund simply saves into a fund which targets a specific year for retirement, which is the target date. He or she can choose a target retirement date to aim for from a range of usually three or five year choices – commonly referred to as vintages.

Usually the system puts an individual’s savings in a combination of riskier assets, such as equities, when members are younger and lower risk assets like bonds and cash as they approach their selected retirement ‘target date’. In a TDF this is done within a single fund. So a member puts their money in and investment decisions are then made for them over the life of the fund. For example, if a member intends to retire in 2045, they would invest in the 2045 TDF fund.

Estimates vary about the number of UK pension schemes using TDFs, but Willis Towers Watson head of DC Investment Paul Herbert puts the number at between 5% and 10% of the market.

The main alternative to TDF is lifestyling, which has been used in the UK for the past 30 years, but Steve Charlton, SEI’s DC managing director for EMEA & Asia, expects TDFs’ popularity to increase.

Indeed, European DC Pensions, Evolution and Revolution, published by Spence Johnson Market Intelligence in 2016, estimates that current TDF usage in the UK totals £2.1bn or 3% of institutional default strategy assets. It predicts that this will increase to one quarter of UK default assets by 2025.

One of the largest pension schemes to use TDFs is NEST. Other master trusts using target date funds include Aon, Bluesky and TPT. Several investment managers offer TDFs in the UK including Alliance Bernstein, Blackrock, Legal & General, State Street and Vanguard.

Vanguard has just launched the Vanguard Target Retirement 2060 Fund and the Vanguard Target Retirement 2065 Fund in the UK. It is the largest manager of such plans in the US with $597bn of target date assets in the country by the end of October.

Page: 1 2 3
0

Leave your comment

View our comments policy

Please login or register with us to leave a comment. It's completely free!

Friday View

Friday View

Shareholder engagement: