Fixed Income


Consultants prefer simple DC menus with two bond options. In addition to core/core plus, many recommend strategies with potential to enhance income and returns.

Which fixed income strategies do DC consultants recommend?

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Optimal Core Lineup
Number of Options
  • 1 Capital Preservation
  • 2 Fixed Income
  • 6 Equity
  • 1 Inflation Protection
*This represents the top strategies consultants would recommend
as stand-alone options on the core investment menu.

Go Custom or Go Blend?


When it comes to default investments, consultants say custom or packaged active/passive blend target-date funds may help calibrate risk exposures, aid diversification and reduce fees.

Plan Size (AUM)

$1 Billion +
53% 13% 21% 0% 13% 0%
$500 Million - $1 Billion
23% 18% 35% 0% 20% 3%
$200 Million - $500 Million
8% 8% 48% 6% 20% 9%

Target-Date Funds likely to be chosen

  • Custom
  • Semi-custom*
  • Packaged active/passive blend
  • Packaged active multi-manager
  • Single-manager passive
  • Single-manager active
*Prebuilt glide-path program from recordkeepers that uses core menu options
Percentages may not sum to 100% due to rounding

Manage Actively


Nearly all consultants said active management is important or very important in non-U.S. bonds (92%), U.S. bonds (88%) and non-U.S. equity (82%).

90% Very Important/Important

7% Somewhat Important

3% Not Important

89% Very Important/Important

7% Somewhat Important

4% Not Important

78% Very Important/Important

16% Somewhat Important

6% Not Important

20% Very Important/Important

56% Somewhat Important

24% Not Important

*Developed markets
Percentages may not sum to 100% due to rounding

Getting Retirement Income Right


As DC plans become the primary vehicle to accumulate retirement assets, the industry searches for the best product to help participants decumulate.

Liquidity
43% 46% 11% 0%
Inflation Protection
29% 57% 14% 0%
No new incremental fiduciary risk
48% 30% 21% 2%
IRA rollover-eligible
24% 46% 27% 3%
Low to little volatility
16% 46% 37% 2%
QDIA-eligible
18% 42% 29% 11%
Distribution sourced from income
15% 41% 34% 10%
Equity Exposure
17% 37% 40% 6%
Insurance guarantees
17% 30% 33% 19%
Stated Distribution Yield
3% 32% 50% 15%
High capital return objective
7% 26% 52% 15%
  • Very important
  • Important
  • Somewhat important
  • Not important

Retirement insights from the country's top consultants

77 DC consultants and advisors from 24 states
17k+ DC plan sponsor clients represented
$4.4+ trillion in client DC assets

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Survey responses were made between 16 December 2017 and 31 January 2018.

Disclosures

Past performance is not a guarantee or a reliable indicator of future results.


All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Sovereign securities are generally backed by the issuing government. Obligations of U.S. government agencies and authorities are supported by varying degrees, but are generally not backed by the full faith of the U.S. government. Portfolios that invest in such securities are not guaranteed and will fluctuate in value. Inflation-linked bonds (ILBs) issued by a government are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Investing in foreign-denominated and/or -domiciled securities may involve heightened risk due to currency fluctuations, and economic and political risks, which may be enhanced in emerging markets. Currency rates may fluctuate significantly over short periods of time and may reduce the returns of a portfolio. Commodities contain heightened risk, including market, political, regulatory and natural conditions, and may not be suitable for all investors. High yield, lower-rated securities involve greater risk than higher-rated securities; portfolios that invest in them may be subject to greater levels of credit and liquidity risk than portfolios that do not. Mortgage- and asset-backed securities may be sensitive to changes in interest rates, subject to early repayment risk, and while generally supported by a government, government-agency or private guarantor, there is no assurance that the guarantor will meet its obligations. REITs are subject to risk, such as poor performance by the manager, adverse changes to tax laws or failure to qualify for tax-free pass-through of income.


Management risk is the risk that the investment techniques and risk analyses applied by the investment manager will not produce the desired results, and that certain policies or developments may affect the investment techniques available to the manager in connection with managing the strategy. There is no guarantee that these investment strategies will work under all market conditions or are suitable for all investors and each investor should evaluate their ability to invest long-term, especially during periods of downturn in the market. Investors should consult their investment professional prior to making an investment decision.


The terms “cheap” and “rich” as used herein generally refer to a security or asset class that is deemed to be substantially under- or overpriced compared to both its historical average as well as to the investment manager’s future expectations. There is no guarantee of future results or that a security’s valuation will ensure a profit or protect against a loss.


This material contains the opinions of the manager and such opinions are subject to change without notice. This material has been distributed for informational purposes only. Forecasts, estimates and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. It is not possible to invest directly in an unmanaged index. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2018, PIMCO.

All investments contain risk and may lose value. Investing in the bond market is subject to risks, including market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds and bond strategies are impacted by changes in interest rates. Bonds and bond strategies with longer durations tend to be more sensitive and volatile than those with shorter durations; bond prices generally fall as interest rates rise, and the current low interest rate environment increases this risk. Current reductions in bond counterparty capacity may contribute to decreased market liquidity and increased price volatility. Bond investments may be worth more or less than the original cost when redeemed. Inflation-linked bonds (ILBs) issued by a government are fixed income securities whose principal value is periodically adjusted according to the rate of inflation; ILBs decline in value when real interest rates rise. Treasury Inflation-Protected Securities (TIPS) are ILBs issued by the U.S. government. Equities may decline in value due to both real and perceived general market, economic and industry conditions. Commodities contain heightened risk, including market, political, regulatory and natural conditions, and may not be suitable for all investors. REITs are subject to risk, such as poor performance by the manager, adverse changes to tax laws or failure to qualify for tax-free pass-through of income. Investors should consult their investment professional prior to making an investment decision.

This material has been distributed for informational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.

CMR2017-0712-278614