Active Global Core Approach in DC Plan Lineups
Many defined contribution (DC) plans are still heavily tilted toward domestic and international equity strategies, which are geographically constrained and increasingly correlated. These strategies provide limited diversification and return potential, and may not be sufficient to round out a plan’s menu of investment choices offered to participants.
Historical data show that global strategies can help provide participants with greater diversification. Additionally, top-quartile global managers have had a better alpha-generation track record—in both magnitude and consistency—than their international and domestic peers over the last three, five and 10 years.1
Many participants admit that limited knowledge about overseas investing is a major factor driving them to favor domestic equities. Plan sponsors may consider educational initiatives to promote an awareness and understanding of the potential benefits of global strategies among participants.2
- An Active Global Core Approach: The Future for Defined Contribution Plans
This white paper examines two challenges DC sponsors face. First, they must rethink how to achieve true asset class diversification within their plan lineup while still maintaining a streamlined offering. Secondly, in order for plan participants to achieve the diversification and growth benefits they seek as part of their retirement savings strategy, DC plan sponsors must dislodge a widely pervasive home bias mentality exhibited by plan participants.
- Investing Beyond Our Borders
Many of the products that Americans rely on every day are manufactured by overseas companies; a trend we believe is likely to continue. Yet although Americans don’t hesitate to consume products made abroad, historically, they strongly prefer to invest in U.S. stocks.3 In our view, this approach may be causing far too many Americans to miss out on some of the best investing opportunities the world has to offer. Global strategies offer the freedom to invest anywhere in the world without being constrained to any single region. With nearly 200 countries in the world, why invest in just one?
1Source: FactSet , September 30, 2014
2OppenheimerFunds proprietary survey conducted in 2012 of 1,000 401(k) participants.
3Source: OppenheimerFunds Proprietary Research, 2013)
OppenheimerFunds is not undertaking to provide investment advice or to provide advice in a fiduciary capacity.
This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.
Emerging and developing market investments may be especially volatile. Foreign investments may be volatile and involve additional expenses and special risks, including currency fluctuations, foreign taxes, regulatory and geopolitical risks. Diversification does not guarantee profit or protect against loss.
Mutual funds are subject to market risk and volatility. Shares may gain or lose value.
These views represent the opinions of OppenheimerFunds, Inc. and are not intended as investment advice or to predict or depict performance of any investment. These views are subject to change based on subsequent developments.