Core: What is it good for?

The role of asset class funds in today’s DC plan, and a three-step process for improving the fund menu. Download the paper.

Despite target date funds playing an increasingly important role in the typical defined contribution (DC) plan, many investment committees are still looking more closely at their core fund menu. For large plan sponsors, this is typically comprised of anywhere from six to 12 individual options. However, if the future lies in the plan’s Qualified Default Investment Alternative (QDIA), it’s reasonable to ask whether we still need a core menu, and if so, how many menus, and how should they be offered to participants?

This paper first discusses the role of the core menu in today's and future DC plans. It then lays out a three-step plan for investment committees to consider when migrating asset-class options. Specifically, we recommend that plans:

1. Streamline the core menu
2. Utilize white-label funds for those with sufficient scale
3. Implement multi-manager portfolios