Shock Poll (Not)! 401k Consultants Say Active Management Preferred

Does it have anything to do with fees and expenses?

Does it have anything to do with fees and expenses?

But will they say the same after tomorrow? 401(k) consultants say that active management remains the favored investment approach for most major asset classes and target-date retirement strategies, the PIMCO Defined Contribution Consulting Support and Trends Survey.

More than three-quarters of the surveyed 66 consultant firms, which advise on over $4.2 trillion in 401(k) assets, said active management is very important or important for U.S. and global bonds; emerging market and other non-U.S. equity; and U.S. small cap stocks.

Consultants continue to recommend that plan sponsors diversify retirement portfolios and complement core bonds through allocations to investment grade credit, high yield, multi-sector and foreign bonds within the core menu and/or custom/white-label strategies.

Meeting participant income goals for retirement is the most important consideration for plan sponsors, according to the survey. Consultants suggest targeting overall income replacement of 80% of final pay, three-quarters of which may need to come from defined contribution plans.

“To achieve that goal, consultants are seeking investment management that will deliver sufficient returns and help manage risk,” Stacy Schaus, executive vice president and author of the survey, said in a statement. “This includes adding diversifying bonds and tapping into active management.”

Other key findings:

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