Only so many tasks are more difficult than finding the most suitable target date fund (TDF) series for a plan’s participants. Our new case study examines and explains the selection of a new target date fund suite for a client, going deep into the process and explanation from start to finish.
The Premise
Multnomah Group aimed to select a TDF series that best aligned with the plan design, participant demographics, and committee goals and preferences. In this case study, our client was a large, public higher education system that requested assistance in developing and implementing a new TDF suite from its plan participants. Additionally, the sponsor organization’s demographics were positive, showing strong contribution behavior, low plan leakage, and low workforce turnover.
The Process
The first step of our procedure was educating the committee on employee contribution behavior required under plan terms, supported by voluntary arrangements. We then compared contribution and behavior data with peers and evaluated it by wage and tenure to better understand participant investment needs and behaviors. Also, we reviewed the two main differentiators in target date fund providers: Market Risk vs. Longevity Risk and Active vs. Passive Management.
Next, we had many thorough conversations about target date glidepaths and how to strike a balance between market and longevity risks while not materially increasing portfolio volatility, which was their goal. We also explored numerous approaches to managing these types of exposures actively and passively while considering related cost impacts.
Multnomah Group is a registered investment adviser, registered with the Securities and Exchange Commission. Any information contained herein or on Multnomah Group’s website is provided for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and, unless otherwise stated, are not guaranteed. Multnomah Group does not provide legal or tax advice.