Fixed Income, Private Assets, TDFs, Among Top Innovations for DC Plan Sponsors
Plan consultants are noticing high interest in non-core fixed income options, multi-asset inflation, and private credit in asset allocation solutions.
Findings from PIMCO’s 20th Annual Defined Contribution (DC) Consulting Study found that over half of institutional consultants expect most clients to incorporate active non-core fixed income options and 45% predict their clients will adopt multi-asset inflation hedging strategies, as more look to safeguard savings in an uncertain market.
“Fixed income markets have changed significantly over the last decade, but most DC plan menus still reflect a narrower, legacy opportunity set. What we’re seeing in this study is a clear shift: consultants and plan sponsors recognize that participants need access to a broader range of fixed income solutions in order to better navigate today’s market environment and improve long-term retirement outcomes,” said Rene Martel, managing director and PIMCO’s head of Retirement.
Interest in private credit is also mounting, with half of consultants and 91% of aggregators listing private credit as among the likeliest private asset strategy that will be included in the short-term.
Blended TDFs, Retirement Income Attention Rising
A high number of consultants and advisors expect clients to consider blended target-date funds (TDFs) as a new default strategy, as demand for personalized products in the workplace grows. Close to half (46%) of aggregator firms believe they’ll see more clients adopt fully customized TDFs, while 85% consider participant-personalized TDFs as “next-generation defaults.”
Others expect some clients to add private market exposure within TDFs or managed accounts in the next 12 months, as the Department of Labor (DOL) gets ready to publish its final rule on the investment products. As adoption increases, PIMCO says consultants and advisors are emphasizing pairing return potential with asset quality, cost, and maintaining liquidity.
Along with TDFs and private equity exposure, consultants list retirement income as an emerging trend in DC plan design. Over half (52%) of plans currently offer in-plan retirement income solutions, and 93% of aggregators plan to adopt lifetime income in the next year.
PIMCO’s study fielded responses from 36 consulting and advisory firms who serve over 53,000 clients with aggregate defined contribution (DC) assets over $10.2 trillion.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news.