Target date funds have been great for defined contribution (DC) plan participants—they are age-based vehicles that reduce risk as retirement nears—but there are still limitations. Increasing numbers of large U.S. plan sponsors have decided that off-the-shelf target date funds aren't for them and are finding custom target date funds more attractive—for several reasons:

  • Custom funds allow for increased control of the glide path and underlying investment allocations
  • Custom funds take into account materially different participant characteristics, relative to the general population
  • Custom funds help meet sponsors' desire to control fees

This paper discusses our eight observations on custom target date funds, including: glide path construction, building block decisions, operations, and ongoing monitoring.

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