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.
OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity.
Mutual funds and exchange traded funds are subject to market risk and volatility. Shares may gain or lose value.
Asset Allocation cannot eliminate the risk of fluctuating prices and uncertain returns. Diversification does not guarantee profit or protect against loss.
Discussion of custom or semi-custom target date models is not intended to represent investment advice that is appropriate for all investors. Each investor's portfolio must be constructed based on the individual's financial resources, investment goals, risk tolerance, investing time frame, tax situation and other relevant factors.
OppenheimerFunds does not recommend any specific asset allocations. A financial advisor can suggest an asset allocation strategy designed to meet your financial goals, time horizon and risk tolerance.
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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.
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These views represent the opinions of OppenheimerFunds' Head of Retirement and Third Party Distribution and are not intended as investment advice or to predict or depict the performance of any investment. These views are as of the publication date, and are subject to change based on subsequent developments.