Institutional target date strategies

Helping keep participants on track to a successful retirement.

Not all target date strategies are the same Features of our glide path Custom target date strategies Evaluating target date strategies Contact us

Target date investment strategies are the qualified default investment alternative (QDIA) of choice for many retirement plans. They are popular for participants who want to leave the management and monitoring of their portfolios to a professional investment manager.

A big concern for retirement plan participants is maintaining their current standard of living in retirement, so their defined contribution plan needs to be a meaningful source of income replacement. Russell Investments’ LifePoints® Institutional Target Date Strategies seek to strike a prudent balance between the dual objectives of generating lifetime income consistently over the course of retirement and limiting the risk of loss of capital around and in retirement.

Not all target date strategies are the same. Some are designed for maximum accumulation, others for downside protection, and yet others for income replacement in retirement. The percentage of growth assets vs. capital preservation assets changes markedly over the life of a TDF in what is known as the "target date glide path," and glide paths vary widely across TDF providers. The differences in asset allocations can lead to very different outcomes.

We offer the LifePoints® Institutional Target Date Strategies and custom target date strategy construction.

Our target date glide path is designed to help manage risk for plan participants

Our glide path is designed to help participants manage risk—to, at and through retirement.

In the early years of a participant’s career, greater exposure to growth assets are the norm when earning potential outweighs current asset and savings dominate portfolio growth. In mid-career, financial capital is building rapidly, so the portfolio is de-risking by introducing more fixed income investments. In retirement, our optimal glide path is flat with lower growth exposure.

Because changes in financial markets and participant needs and behaviors change over time, we perform a strategic review of our glide path assumptions every three years to ensure the strategies are appropriately designed to meet their objective of delivering sustainable income in retirement.

LifePoints® Institutional Target Date Strategies

Our LifePoints® Institutional Target Date Strategies are multi-manager, multi asset class, outcome-oriented strategies built to provide your DC plan participants with access to some of the best Russell Investments-researched managers in the world.

The strategies are constructed using Russell Investments' multi-manager strategies – investing in global equity, fixed income, and real assets – providing participants with access to leading managers in each asset class. These actively managed solutions are complemented by passive management in "more efficient" markets – U.S. large cap equity, international developed large cap and U.S. Treasury inflation-protected securities (TIPS). This blend of active and passive management creates cost efficiencies while maintaining focus on return potential for participants. In addition to the robust solutions underlying the strategic glide path, the portfolio manager has the ability to react to market conditions by tilting asset class exposures within bands of +/-10%.

Features of our glide path

Glide path design

  • Evaluate participant demographics.
  • Determine the target replacement income ratio for the overall plan.
  • Determine appropriate mix of underlying asset classes from the managers you select.

Implementation & operations

  • Provide you with a dedicated project management team.
  • Coordinate key roles and responsibilities of recordkeeper, trustee, custodian and the underlying fund managers.
  • Implement rebalancing and cash flow rules.

Ongoing management

  • Oversee rebalancing and roll-downs.
  • Monitor and resolve investment or operational issues.
  • Provide quarterly performance and operations reviews.
  • Incorporate new investment concepts as developed.
  • Implement manager changes.

Focus on managing risks at – and through – retirement

Russell Investment optimal glide path

Key elements to our target date glide path construction

A disciplined methodology

Documented research, optimized glide path and asset allocation designed to help participants reach their retirement income goals.

Designed to adapt to changing markets

Our target date glide path process allows us to adjust for current or forecasted market conditions to help us manage and balance risk and returns.

Income replacement objective

Sets a 49% income replacement goal from the DC plan to supplement Social Security.

Wealth preservation risk metrics

Applies a shortfall penalty to glide paths that miss the retirement income objective–to manage the risk that a participant will have a significant shortfall.

Custom target date strategies

We also offer custom target date strategy construction for larger defined contribution plans seeking a more tailored solution for their QDIA.

Custom target date strategies let the plan sponsor maintain control over underlying investment manager selection and construct a glide path designed to help meet participants' specific income replacement needs. We have expertise in helping some of the largest plan sponsors build and maintain custom target date strategies.

Customized for your plan demographics

To create your custom target date solution, we evaluate your plan's specific:

  • Contribution rates
  • Level of account balances
  • Retirement dates
  • Defined benefits

Implementation experience matters

Building a glide path with the right design and managers is just the start. A knowledgeable implementation team can make all the difference in the successful implementation and ongoing management of your custom strategies.

Strategies built from the managers you select

Custom-designed target date portfolios use your existing investment options and/or selectively screened managers to populate the asset classes, allowing you to maintain control over the selection of the underlying investment managers and strategies.

Structure your portfolios according to your asset class preferences

A custom-designed glide path lets your plan's investment committee decide which asset classes should be represented in the target date strategies and which investment managers to hire.

We stand behind our glide paths

At Russell Investments, we will help you build custom target date portfolios and take responsibility as the ERISA 3(38) investment manager fiduciary for the asset allocation, assuming discretion in the reallocation of assets as part of the rebalancing and roll-down process. Through our manager research capabilities, we can provide guidance on the selection or oversight of any underlying investment managers.

Focus on managing risks at – and through – retirement

Russell Investment optimal glide path

Things to consider when evaluating target date strategies

Consider how glide path design and asset allocation strategies can help participants reach their income replacement targets.

We believe a glide path evaluation should be based on the purpose and goals of the target date strategies. Investors in target date strategies seek to maximize reward while minimizing risk. In particular, the reward is the sufficient growth to achieve a desired retirement income. Backed by solid research, our LifePoints® Institutional Target Date Strategies glide path offers participants access to a broad range of asset classes including U.S., non-U.S., and global equities, real assets, bonds and TIPS (treasury inflation protected securities).

Look beyond a single manager solution for broad diversification and strong manager expertise.

Our 30-year history of managing portfolios has taught us that the best investment portfolios are diversified on multiple levels and that no single manager can be best in all disciplines. That’s why our LifePoints® Institutional Target Date Strategies offer a multi-asset, multi-manager solution. Each strategy invests across a broad range of asset classes and uses a blend of active and passive management. Within each actively managed asset class, we include a diversified mix of third-party money managers.

Review fees and investment expenses.

Costs can vary significantly, potentially reducing participants’ long-term retirement savings.

Our LifePoints® Institutional Target Date Strategies are institutionally priced offerings that blend active and passive underlying strategies. This helps manage overall strategy costs while offering participants the benefit of potential excess returns through active management.

Know your participants.

It is important to understand your plan participants’ demographics and behaviors and how they compare to glide path assumptions. If plan sponsors determine the levels of risk that make sense for participants at each life stage, then they can answer one of the most important questions about the glide path: How much equity exposure should participants have at the point of retirement?
Target retirement years and target date strategies

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Case studies are problem-solving stories. We select a situation that is indicative of problems clients in this category are facing. The recommendations described do not represent a standard strategy or set of recommendations made for all advisory clients with similar issues. Each client has unique requirements, challenges, and constraints, and our advisory solutions are tailored to each client’s specific needs.

Kerry D. Bandow, CFA

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Kerry D. Bandow, CFA
Senior Director, Defined Contribution Solutions, North America Institutional

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