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1st Quarter 2021 Glidepath Changes: An Overview of the Landscape

There's a plethora of different glidepaths within the target date fund (TDF) industry. Issuers create the path of their choosing based on many different factors. Along with this, issuers also have the right to change the glidepath whenever they want. These changes can be wholesale glidepath changes or more fringe-type changes. While some quarters see no changes within the industry, in 1Q21 there were a handful, possibly corresponding with year-end reviews by the individual issuers.

There’s a plethora of different glidepaths within the target date fund (TDF) industry.  Issuers create the path of their choosing based on many different factors.  Along with this, issuers also have the right to change the glidepath whenever they want.  These changes can be wholesale glidepath changes or more fringe-type changes.  While some quarters see no changes within the industry, in 1Q21 there were a handful, possibly corresponding with year-end reviews by the individual issuers.  As a reminder, the changes we will talk about here are target glidepath changes.  The actual glidepath implemented can vary from said targets based on factors such as a stated leniency/range set forth in the TDF documents (i.e., prospectus), rebalance schedule, etc.

Aon Hewitt
Aon Hewitt increased the equity exposure for post-retirement investors, changing the landing equity (at 10 years past retirement) from 26% to 34%.


      (Chart Source: Stadion)

Goldman Sachs
Goldman Sachs made a couple changes to their glidepath.  First, they moved the period in which they would start decreasing equity exposure from 20 years from retirement to 15 years from retirement.  They also slightly raised they equity exposure for investors in retirement from 38% to 42%.


       (Chart Source: Stadion)

Nationwide
Nationwide did not alter the beginning nor ending amount of equity on the glidepath but, rather, just the shape of the glidepath. They reduced the speed  at  which equity decreases for investors about 30 years from retirement and subsequently  increased the reduction speed for investors 10 years from retirement, resulting in a more convex glidepath.


       (Chart Source: Stadion)

PIMCO
PIMCO broadly raised equity across the entire glidepath, increasing exposure 7% for investors farther from retirement and tailing down to a 2% increase for investors in retirement.


        (Chart Source: Stadion)

Putnam (Retirement Advantage)
Putnam had a small 3% increase in equity exposure for investors in retirement, from 25% to 28%.


       (Chart Source: Stadion)

As you can see, most of the changes this quarter were increasing equity for investors in retirement.  As we continue in a low (but potentially rising) interest rate environment, it will be interesting to see if other issuers follow suit by increasing equity exposure and decreasing fixed income exposure for in-retirement investors.

A target-date fund is a class of mutual funds or ETFs that periodically rebalances asset class weights to optimize risk and returns for predetermined time frame.
 
The specific issuers reported upon here may be researched via the following URLs:
 
AON: https://www.aon.com/getmedia/90813515-28cf-447e-ad29-cde51f14f86a/Form-ADV-Part-2A.aspx
 
Goldman:  https://www.gsam.com/content/gsam/us/en/advisors/resources/investment-ideas/target-date-funds.html
 
Nationwide: https://nationwidefinancial.com/#!/products/investments/mutual-funds/dcio/target-desti nation-funds
 
PIMCO: https://www.pimco.com/en-us/realpath-blend
 
Putnam: https://www.putnam.com/dcio/mutual-funds/?asset-class=target-date
 
There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical measurements are one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity.
 
There is no guarantee of the future performance of any Stadion account. Material has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Results based on available universe of Target Date Fund Series, which includes registered mutual funds, and non-registered collective investment funds and insurance accounts. Collective investment funds and insurance accounts are only available for investment to qualified retirement plan assets such as 401(k) plans.
 
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