April 21, 2010 14:48 ET

Defined Contribution Consultants Report Growth in Custom Target-Date Strategies

NEWPORT BEACH, CA--(Marketwire - April 21, 2010) -  Investment consultants say custom target-date strategies are growing in prevalence as options in defined contribution retirement plans, such as 401(k)s, according to the 4th Annual Defined Contribution Consulting Support and Trends Survey released today by PIMCO, a leading investment management firm and provider of retirement solutions.

According to the Survey, Consultants are well positioned to support this trend with the vast majority of consulting firms (90%) offering custom strategy consulting, including the majority of firms (82%) offering to act as a fiduciary for their custom services such as managing a plan's asset-allocation (i.e., glide-path). Consultants also identify over 20 record-keeping firms that support custom strategies.

"Custom target strategies provide plan sponsors ultimate control of their DC plan, including best-in-class investment management, glide-path design flexibility, institutional pricing, as well as optimal fiduciary oversight and transparency," said Stacy Schaus, senior vice president and leader of PIMCO's Defined Contribution Practice. "It's not surprising to know that consultants and record keepers are supporting more of their clients with custom strategies."

Consultants believe target-date strategies should be tailored to an organization's demographics. That is not always the case today as many plans use "off-the-shelf" target-date funds. More troubling, nearly half of consultants surveyed believe existing glide paths are too aggressive, especially in light of how these strategies performed during the recent market crisis.

To mitigate risk, consultants suggest that plan sponsors add diversifying assets beginning with treasury-inflation protected securities (TIPS), which they also note as the most effective hedge against inflation. The majority of consultants identified tactical asset allocation as a somewhat important to critical component of glide-path management.

Schaus, who has been named by 401k Wire as among the 50 most influential leaders in defined contribution for 2010, authored the just-published "Designing Successful Target-Date Strategies for Defined Contribution Plans" (Wiley Finance, 2010). The book demystifies the often-daunting task of understanding target-date strategies, and can help plan sponsors develop customized solutions. It also incorporates insights from many of the consultants surveyed, outlining possible solutions for the best way to design your own asset allocation, keep plan fees at the lowest possible level and help cushion both plan participants and sponsors against risk.

Other findings from the survey include:

  • 75% of consulting firms report that their clients prefer retaining retiree assets. Yet most consultants report that most sponsors do not actively encourage retirees to keep their assets in the plan. However, a fifth of the consultants noted clients are somewhat likely to add a "deemed IRA" to their DC plan to allow retirees and their spouses to consolidate assets within the DC plan.

  • 80% of consulting firms believe their clients will add a retirement income option within the next two years. Fixed annuities, living benefit and longevity insurance are the top three products of interest.

About PIMCO's DC Practice and Annual Survey
PIMCO's DC Practice has prepared the 2010 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 2010 survey captures data, trends and opinions from 30 consulting firms across the U.S. that serve nearly 2,000 clients with aggregate DC assets of $1.7 trillion.

For our survey highlights, please contact our DC Practice at (888) 845-5012 or email us at

PIMCO, founded in 1971, is a global asset management firm that manages investments for an array of clients, including retirement and other assets that reach more than 8 million people in the U.S. and millions more around the world. Our clients include state, municipal and union pension and retirement plans whose beneficiaries come from all walks of life, from educators to healthcare workers to public safety employees. We have a substantial individual investor client base, and work in partnership with financial intermediaries such as Registered Investment Advisors, broker/dealers, trust banks and insurance companies. We are also advisors and asset managers to central banks, corporations, universities, foundations and endowments. With offices in North America, Europe, Asia and Australia, we manage investments across a full spectrum of global financial markets. PIMCO is owned by Allianz Global Investors, a subsidiary of the Munich-based Allianz Group, a leading global insurance company.

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.

The information contained in this press release is not indicative of the past or future performance of any PIMCO product and should not be considered as investment advice or a recommendation by PIMCO of any particular security, strategy or investment product. PIMCO does not offer insurance products or products that combine securities and insurance features. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. This material is provided for informational purposes only. Pacific Investment Management Company LLC, 840 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2010, PIMCO.

Contact Information

  • Contact:
    Steven Vames
    PIMCO - Media Relations