April 09, 2012 10:53 ET

401(k) Consultants Cite Acceptable Target Date Loss Tolerance for Participants at Retirement Age

Lowering Risk and Expanding Assets in a Post-Crisis, Lower Return World

NEWPORT BEACH, CA--(Marketwire - Apr 9, 2012) - Investment consultants believe participants in defined contribution (DC) plans who are at retirement age can face losses of no more than 5% in target-date strategies if they are to reach their retirement income goals, according to the 6th Annual Defined Contribution Consulting Support and Trends Survey released today by PIMCO, a leading global investment management firm and retirement solutions provider.

The risk-tolerance target revealed in the survey of 39 leading investment consulting firms reflects lessons learned during the financial crisis when some investors in DC plans saw their retirement portfolios severely damaged right at the point they were about to exit the workforce because their target-date strategies were over-allocated to or highly correlated with risk assets. Proper management of retirement portfolios is even more important in a world in which nearly three-quarters (71%) consultants expect greater market volatility and half anticipate lower investment returns.

"The new investment landscape compels plan sponsors and investment managers to focus more than ever on risk -- to and even through retirement," said Stacy Schaus, executive vice president and PIMCO's defined contribution practice leader. "At the same time, plans must help participants create income for life, deploying managers who can draw on a wider array of asset classes at home and abroad, including emerging markets, commodities and absolute return."

Nearly three-quarters (71%) of consultants believe custom approaches to target-date strategies would be an improvement over packaged products, and less than a quarter (21%) think there is currently enough choice among the target-date strategies available to plan sponsors off the shelf.

Other findings of the survey include:

  • Asset classes seen as providing the most value if added to a plan include EM equities (67% of consultants) commodities (60%) and absolute return (57%)
  • Tips are seen by most consultants (78%) as the best asset class to reduce risk
  • The majority of consultants (89%) believe it is somewhat to very important to actively manage global asset-allocation strategies, which are also seen as the best way to gain exposure to EM

About the Survey
PIMCO's DC Practice prepares the annual Defined Contribution Consulting Support and Trends Survey to help plan sponsors understand the breadth of views and consulting services available in the DC marketplace. The 39 consulting firms in the 2012 survey serve over 3,600 clients with aggregate DC assets of $1.8 trillion.

For survey highlights or other PIMCO DC publications, please contact us at 888.845.5012 or email us at

PIMCO is a leading global investment management firm, with offices in 11 countries throughout North America, Europe and Asia. Founded in 1971, PIMCO offers a wide range of innovative solutions to help millions of investors worldwide meet their needs. Our goal is to provide attractive returns while maintaining a strong culture of risk management and long-term discipline. PIMCO is owned by Allianz S.E., a leading global diversified financial services provider.

Investing in foreign denominated and/or domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Commodities contain heightened risk including market, political, regulatory, and natural conditions, and may not be suitable for all investors. Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Inflation-linked bonds (ILBs) issued by a government are fixed-income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. Government.

Except for the historical information and discussions contained herein, statements contained in this news release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the performance of financial markets, the investment performance of PIMCO's sponsored investment products and separately managed accounts, general economic conditions, future acquisitions, competitive conditions and government regulations, including changes in tax laws. Readers should carefully consider such factors. Further, such forward-looking statements speak only on the date at which such statements are made. PIMCO undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Contact Information

  • Contact:
    Michael Reid
    PIMCO - Media Relations