Fund Companies Scale Back Risk in Target Date Funds

It looks like the ride has gotten less bumpy for many target-date funds aimed at people near retirement, according to a Morningstar report published in September. To get there, it has taken a bit of risk management tinkering at fund providers.

Josh Charlson，Minultstar高级基金分析师Josh Charlson表示，2010年和2015年2010年和2015年的资金总体上总体的资金可能不那么挥发。他补充说，大部分改善源于降低滑动路径的股票曝光。此外，一些资金从股票那里产生了从固定收益的损失，并转向了较低的固定收入控股。

Some target date providers are now using more direct risk-management strategies, Charlson says. As examples, he points to the PIMCO RealRetirement series’ emphasis on long-term real returns and use of a tail-risk hedging strategy, the Invesco Balanced-Risk Retirement Funds’ utilization of a risk-parity approach, and the AllianceBernstein Retirement Strategies series’ addition of a “volatility-management sleeve” to its glide path.

The challenge now is to pull off that risk-control focus without sacrificing too much of investors’ long-range retirement income outlook. “There is definitely a risk of the pendulum swinging too far in the other direction,” Charlson says of being overly conservative. “A number of providers, as they have lowered the stock allocation relatively close to retirement, have raised it a bit in longer-dated funds. That is a way of bar-belling the approach.”

三个目标日期提供者打开了他们的工具箱，以解释他们如何努力实现风险控制平衡。

AllianeBernstein在2010年实施了波动率管理套筒。该公司使用量化模型在市场条件保证时向内部团队发出信号，考虑到资产类别等股权减少等短期转变。“The other solution is to say, ‘I am going to load up on bonds as part of my strategic asset allocation.’ But that can be devastating to a portfolio in the long term,” says Thomas Fontaine, global head of AllianceBernstein’s defined contribution business.

While the new risk-control tool does not alter the long-term strategic allocation, it can affect up to 20 percent of the short-term allocation for near-retirees. “That is 20 percent to a component where the neutral position is 100 percent global equity. But within that strategy, we can change the mix from 100 percent global equity to 100 percent Treasuries,” Fontaine says. “Right now, it is basically all bonds.”

“通过9月的前三周，它相对于我们正常的战略资产配置，本月和本季度将损失减少了约2％，”Fontaine说。“如果市场恢复，如果我们在相对于我们的战略重量相对于我们的战略重量保持体重不足，我们将回馈一些额外的回报。当市场下降时，我们将倾向于减少较少，当市场恢复时，我们将获得较少。在整个周期上，返回应该大致相同，但波动率较少。“

Meanwhile, Schwab is among the providers bar-belling the equity exposure. Its 2009 glide path shift increased equity exposure for younger investors, and decreased it for those nearing retirement. The 2040 fund went to 91 percent stocks and the 2030 fund to 82 percent, a Morningstar report on its fund series says.

“接近退休的人没有能力从大损失中恢复过来。他们需要确保他们能够维持他们积累的收入水平，“Charles Schwab投资管理的股票交局高级副总裁兼首席投资官员奥马尔·艾鲁马拉说。他说，股权持有2010年资金下降至40％。“在倒塌的方面，对于年轻人的人来说，他们需要遵循纪律处于纪律的投资过程，使他们积累了尽可能多的财富，”他补充道。

Schwab has been satisfied with the impact those changes have had on the funds’ results in the past few months, Aguilar says. The near-dated funds have been less volatile and the further-dated funds have been somewhat more volatile, but the idea is that younger investors have plenty of time to stick with it and earn good long-term returns.

BlackRock’s LifePath Portfolios have had the same glide path since 2003, with a strategic focus on consistency of drawdown in retirement. The goal is for retired investors to have accumulated enough to withdraw 4 percent of their balance annually and have sufficient retirement income.

When managing market risk for the target date funds, rather than only trying to maximize income replacement, “it comes back to delivering a consistent and reasonable range of outcomes that will provide for reasonable drawdowns in retirement,” says Chip Castille, head of BlackRock’s U.S. and Canada defined contribution business. “We are forecasting market risks, and we decide, if we want a 4 percent drawdown for 30 years, in real returns, what the glide path needs to be.” Results for the past couple of months have been within BlackRock’s expectations, he says, without discussing specifics.

Asked about some of the relatively new risk-control approaches that Morningstar cites, Castille considers it part of the evolution of the target date space. Some providers came in later to the field, he says, and prior to fall 2008 tried to differentiate themselves with very aggressive equity landing points. “And then they realized that approach led to some surprises,” he says.