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Understanding Investing

Don’t Limit the QDIA to Just Active or Passive

PIMCO’s Bransby Whitton, product strategist, explains why target date funds that blend active fixed income and passive equites are a better representation of what sponsors believe is best for plan participants in the QDIA.

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Whitton: We designed RealPath Blend to offer a packaged target-date solution alternative to all-passive and all-active packaged target-date funds.

This becomes apparent when you look at how sponsors and advisors design the core menu.

Core menus are constructed fund by fund to maximize value for participant. And as it turns out, over half of the time, core menus are designed by blending both passive and active options.

However, in the qualified default investment alternative space, or QDIA, sponsors and advisors have been limited to making a passive or active choice.

The result is a glaring inconsistency between what sponsors and advisors believe to be right for participants on the core menu versus what they are selecting for the QDIA.

We are addressing this limitation with RealPath Blend. When given the choice, plan sponsors and advisors judiciously select where participants spend their fee dollars.

Based on our 2019 consultant survey, for plans below a billion, roughly 50 percent of consultants and advisors recommend packaged active-passive blend target-date funds.

Additionally, most consultants highly ranked the importance of going active in fixed income.

In fact, those same consultants surveyed believed that active management is extremely important or very important for both U.S. bonds and non-U.S. bonds.

We are very happy to offer sponsors and advisors with an alternative to all-passive and all-active packaged target-date funds with RealPath Blend.

We followed a best-of-both-worlds approach by combining PIMCO’s time-tested active fixed income expertise with Vanguard’s efficient passive equity exposure. Our mantra is to go active where it matters and passive where it saves.

Disclosure


Investors should consider the investment objectives, risks, charges and expenses of the funds carefully before investing.  This and other information are contained in the fund’s prospectus and summary prospectus, if available. Encourage your clients to read them carefully.

Vanguard and PIMCO are not affiliated.

A word about risk: All investments contain risk and may lose value. Investors should consult their investment professional prior to making an investment decision. Management risk is the risk that the investment techniques and risk analyses applied by PIMCO will not produce the desired results, and that certain policies or developments may affect the investment techniques available to PIMCO in connection with managing the strategy. A target-date strategy is a strategy based upon the approximate year in which investors in the strategy would plan to start withdrawing their money. The principal value of the funds is not guaranteed at any time, including at the target date.

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 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. PIMCO is a trademark of Allianz Asset Management of America L.P. in the United States and throughout the world. ©2019, PIMCO.

PIMCO Investments LLC, distributor, 1633 Broadway, New York, NY 10019, is a company of PIMCO.

For investment professional use only; not to be shared with the retail public

CMR2019-0927-416695

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