Currently $2 of every $3 invested in target-date funds (TDFs) in retirement plans goes to a series that invests primarily in passive index funds, according to Morningstar. As OppenheimerFunds’ Head of Retirement & Third Party Distribution, Kathleen Beichert, recently discussed with PlanAdviser, there are good reasons to consider custom, rather than proprietary, TDFs and active choices over passive options.

  • Given the care that plans take to offer best-in-class options in their core menus, the U.S. Department of Labor in 2016 suggested that plans might want to build custom TDFs that would draw on those core options.
  • Proprietary TDFs are often not open architecture so a single firm manages the assets in every underlying fund. A custom TDF enables participants to diversify the managers of their retirement assets.
  • A custom TDF enables sponsors to select the "best of breed" in every investment category, whether they are active or passive managers.
  • A custom TDF also offers plans the flexibility to influence the funds’ glide path construction.

Watch the video, PlanAdviser interviews Kathleen Beichert on custom target date funds.