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Industry NewsWhat Target-date Recovery? In the February 8, 2010 issue of Pensions & Investments there is a letter to the editor from Ron Surz, President of Target Date Solutions, that reads in part as follows: "Heat is not the issue ("Target-date turnaround lowers the
heat on managers' returns," Pensions &Investments, page 2,
Jan. 25). Fiduciary responsibility is. Fiduciaries really need to understand
that there are choices that go beyond their record-keepers, focusing
on the usual trade-offs between growth/risk and safety, especially as
the target date approaches. Recall that a popular default used to be
stable value. Now the pendulum has swung too far away from safety and
toward growth/risk. Importantly, fiduciaries need to know that target-date
funds are all "through" funds, designed to serve participants
until death - target-death funds - so the date in the fund name is meaningless.
This employment to grave objective is silly for two reasons: Employees
don't stay in the plan after they retire and there is no glidepath that
can do a sensible job of allocating longevity risk. An observation about
this 2009 "vindication": AllianceBernstein's 2010 fund recovery
from a -32.7% loss in 2008 to a whopping 29.6% gain in 2009 still leaves
the participant with a 13% loss, NOT the 3% loss that the casual reader
might infer. Fiduciaries have the power and duty to improve target-date
funds. Regulation is a stick that won't work; demanding good target-date
funds is a carrot that will do the job." (Source: Pensions & Investments)
Updated 3/2/10 |
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