SOURCE: PIMCO

April 25, 2008 11:52 ET

PIMCO Survey Finds DC Consulting Business Growing to Serve Increased Needs of DC Plans, Creating Custom Target Strategies, and Adding Diversified Assets Including Treasury Inflation Protected Securities (TIPS)

DC Consultants Support Custom Target Date Strategies as Default Investment for Defined Contribution Plans

NEWPORT BEACH, CA--(Marketwire - April 25, 2008) - Investment consultants believe that defined contribution retirement plans, such as 401(k)s, will increasingly default participants into target date investment strategies over the next several years, according to the "PIMCO 2008 Defined Contribution Consulting Support and Trends Survey" released today by PIMCO, a leading investment management firm and provider of retirement solutions.

Target date strategies, which automatically rebalance portfolios as they move toward the investor's expected retirement date, will be the most prevalent default investment for participants, according to 79% of survey respondents. Over two-thirds of the firms (68%) actively promote the value of custom target date strategies, which are typically created using a mix of core investment offerings in the DC plan. Among the services consultants provide, glide path management is offered by 76%, while 95% of the firms surveyed are accepting fiduciary responsibility and 55% are willing to act as an investment manager.

Two-thirds of investment consultants believe it is critical or very important to provide inflation protection in a DC plan. The majority said that preferred asset classes for inflation protection are TIPS, followed by commodities and real estate. They also see value in diversification into other assets such as high yield and global fixed income.

"Given the ever-increasing dependence on DC plans as the primary source of retirement income, we're finding that consulting firms are bringing their most sophisticated asset allocation capabilities to plan sponsors," said Stacy Schaus, senior vice president and PIMCO's Defined Contribution Practice Leader. Schaus notes that custom strategies allow plan sponsors to offer a blend of best-in-class investment management, as well as the ability to diversify the asset mix in the way they traditionally have in defined benefit plans. "Consultants are helping plan sponsors create better diversified, best-in-class custom strategies with the objective of enabling plan participants to meet their retirement income goals."

Most consultants (90%) believe plan sponsors should consider creating their own custom strategies once plan assets exceed one billion, yet even at $200 million in assets nearly two-thirds (62%) believe custom strategies may make sense for DC plans. As plan sponsors consider creating their own or selecting a packaged target date product, over a third of consultants (38%) believe they are likely to consider the probability of meeting a retirement-income adequacy goal as the most important factor. Volatility of returns and fees were considered the most important factors by 28% of the consultants.

Other Survey Results Include:

--  69% of consultants reported having a dedicated DC team.
--  62% use their own proprietary asset allocation models.
--  66% say a liability-driven investment approach is applicable within a
    DC plan.
--  67% reported plan sponsors are somewhat to highly likely to add a
    guaranteed income option within their DC plan, with a Guaranteed Minimum
    Withdrawal Benefit most likely.
    

About PIMCO's DC Practice and Annual Survey

PIMCO's Defined Contribution Practice is dedicated to promoting effective DC plan design and innovative retirement solutions. Our team is pleased to support our clients and the broader community by sharing ideas and developments in DC plans in the hopes of fostering a more secure financial future for employees of corporations, not-for-profits, governments, and other organizations.

"PIMCO's 2008 Defined Contribution Consulting Support and Trends Survey" captures data, trends and opinions from 29 consulting firms across the U.S. that collectively serve more than 1,400 clients with aggregate DC assets of nearly $1.4 trillion. For our survey highlights, please contact our DC Practice at (888) 845-5012 or email us at pimcodcpractice@pimco.com.

About PIMCO

PIMCO, founded in 1971, is a global asset management firm serving a full range of institutional and retail investors worldwide. Our reputation as one of the world's top asset managers rests on our combination of a long-term investment approach, superior client servicing and cutting edge technology. With offices in nine countries in North America, Europe and Asia, we manage investments across a full spectrum of global financial markets. Our success is built on our goal of consistently providing 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 insurance company.

To schedule a phone or television interview with Stacy Schaus about this survey, PIMCO's DC Practice, or other retirement investment topics, please call Steven Vames at 212-739-3598 or email steven.vames@pimco.com.

Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. High-yield, lower-rated, securities involve greater risk than higher-rated securities. 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. Diversification does not ensure against loss.

This material contains the current opinions of the manager and such opinions are subject to change without notice. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product.

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