SOURCE: PIMCO

PIMCO

March 07, 2011 08:00 ET

401(k) Consultants Support Active Management and Custom Target-Date Strategies as Important to Retirement Success

Plans Need Broader Diversification and Tailored Glide Paths

NEWPORT BEACH, CA--(Marketwire - March 7, 2011) - Investment consultants, expecting lower capital market returns and more volatility, support broader asset diversification and custom target-date strategies for defined contribution plans, according to the 5th Annual Defined Contribution Consulting Support and Trends Survey released today by PIMCO, a leading investment management firm and provider of retirement solutions. 

Almost two-thirds of consultants expect a continuing "new normal" economic environment of lower capital market returns and similar or higher volatility than in the past. The majority of consultants believe that active investment management is important for all asset classes surveyed except large-cap U.S. equity. A slight majority (55%) of consultants also believe that tactical asset allocation within a target-date strategy is at least somewhat important.

"Consultants encourage broader asset diversification for DC plans, including adding investments such as Treasury Inflation-Protected Securities (TIPS) and other real assets like commodities and real estate. They also think that plans should have a more global reach, including actively managed emerging market assets and non-U.S. bonds," said Stacy Schaus, senior vice president in PIMCO's Newport Beach office and head of the firm's Defined Contribution Practice.

Almost all of the consultants (89%) surveyed offer custom target-date consulting services of some sort to their clients. In fact, 46% of consultants said that creating custom glide path structures is one of their top areas of business growth. What's more, 90% believe that varying company demographics should drive unique glide paths, especially for larger organizations. Whether it be designing a custom strategy or selecting a packaged product, evaluating the glide path structure was ranked by consultants as the most important selection criterion.

Overall, consultants reported continued growth in their defined contribution businesses. Added Schaus, "It's clear that more plan sponsors are hiring consultants to help them meet their fiduciary duties, including investment structuring, provider selection and plan governance. Consultants are helping move DC plans in an institutional and outcome-focused direction."

Other findings from the survey include:

  • Consultants are split evenly on whether stable value will grow or decline in prevalence, with the vast majority (82%) anticipating plan sponsors to evaluate the investment managers underlying their stable value offerings.
  • About 78% of consultants believe their clients prefer to retain retiree assets in their plan, and about a third (32%) expect their clients to add a "deemed IRA" to their plans, allowing the consolidation of participant and spousal IRAs within the plan.
  • Most consultants (85%) said the addition of a retirement income option is likely in the next two years, yet most noted that discussions are moving slowly.

About PIMCO's DC Practice and Annual Survey
PIMCO's DC Practice has prepared the 2011 Defined Contribution Consulting Support and Trends Survey to help plan sponsors understand the breadth, views and specific consulting services available within the DC marketplace. Our 2011 survey captures data, trends and opinions from 29 consulting firms across the U.S. that serve nearly 2,500 clients with aggregate DC assets of over $1.5 trillion.

For our survey highlights or other DC publications, please contact our DC Practice at (888) 845-5012 or email us at pimcodcpractice@pimco.com.

About PIMCO
PIMCO is a leading global investment management firm with offices in 10 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 Global Investors, a subsidiary of the Munich-based Allianz Group, a leading global diversified financial services provider.

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. Pacific Investment Management Company LLC, 840 Newport Center Drive, Newport Beach, California 92660, 949-720-6000. ©2011, PIMCO

Contact Information

  • Contact:
    Michael Reid
    PIMCO - Media Relations
    212-739-3253