A recent Plansponsor article talks about the need for custom TDFs, as they can bring diversification and less risk for vast participant demographics. Plan sponsors may want to consider custom TDFs for two reasons.
- They want to continue to use a manager from their core investment lineup in their TDF.
- A plan sponsor is not finding a glide path in off-the-shelf products that they feel meets the needs of their participant demographic.
In this article, our Mike Swann and Jake Tsudy weigh in on the potential benefits customization can bring.Read the full article here
Glide path: A formula that defines the asset allocation mix of a target-date fund, based on the number of years to the target date.
TDF: Target-date funds.
Information provided by SEI Investments Management Corporation, a registered investment adviser and wholly owned subsidiary of SEI Investments Company.
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Investing involves risk including possible loss of principal. There can be no assurance goals will be achieved nor that risk can be managed successfully. Diversification may not protect against market risk. Bonds and bond funds will decrease in value as interest rates rise. High yield bonds involve greater risks of default or downgrade and are more volatile than investment grade securities, due to the speculative nature of their investments. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume.
Alternative investments are subject to a complete loss of capital and are only appropriate for parties who can bear that risk and the illiquid nature of such investments. Managed volatility strategies are typically designed to deliver equity like returns with substantially lower risk, though there can be no guarantee that this objective will be achieved.