Text on screen: PIMCO

Text on screen: PIMCO provides services only to qualified institutions and investors. This is not an offer to any person in any jurisdiction where unlawful or unauthorized.

Joseph Szalay: Personalization is a natural next step for target date funds, and as we introduced in the first episode of this series, myTDF is an innovative solution that makes personalized glide paths for individual participants as easy as traditional target date funds.

Text on screen: TITLE – The next evolution in retirement plan design; SUBTITLE – SIMPLE AND EASY

Image on screen: A diagram with a check mark in the middle highlights how myTDF is simple and easy. To the left of the check mark, for plan sponsors, the diagram notes seamless plan integration and implementation. On the right, for participants, the figure explains how there’s no effort in enrollment, with all five data points coming directly from the plan recordkeeper and payroll provider.

Plan sponsors may think offering personalization for a large participant population would be hard, but in fact it’s simple. It’s also simple for participants because the factors used to customize their portfolios come directly from the recordkeeper. So, just like traditional Target Date Funds, myTDF requires no participant engagement.

Image on screen: A figure shows three components of myTDF. On the far left, a circle is labeled “myTDF”, which links to three other circles to its right, arranged as a vertical column. The first of those circles, at the top of the column, highlights PIMCO. To its right are bulleted points: Glide path algorithm, RealPath Blend CITs from PIMCO and Vanguard, and fiduciary 3(38) oversight. The next circle, directly below the PIMCO section, highlights the recordkeeper, with three features listed: managing participant level implementation process, powering participant engagement platform, and integrating with Morningstar. The final circle, at the bottom, is labeled “Morningstar,” with bulleted items calling attention to how the technology platform houses glide paths, maps participant data stored at the record keeper, and that PIMCO doesn’t receive personal data.

All the hard work is done behind the scenes by PIMCO and our partners.

We’ve initially selected Morningstar to house PIMCO’s proprietary glidepath model and map participant data stored at the Recordkeeper. This allows us to provide hundreds of thousands personalized portfolios without PIMCO receiving any personally identifiable information directly.

Image on screen: A diagram uses a flow chart to show how myTDF works in practice. At the top, above a horizontal row of boxes, a box notes how PIMCO provides the algorithm output containing an extensive set of glide path allocations and portfolio mappings to Morningstar (i.e. the myTDF engine). This box points downward to the second of the three horizontally arranged boxes. The second box notes how Morningstar processes the inputs through the myTDF engine to output the optimal allocation and portfolio mapping for each participant. The box has an arrow pointing to the next box to the right, which notes that the recordkeeper executes the allocations. This box, which is furthest to the right, has an arrow circling back to a box on the far left, which notes how the recordkeeper sends key participant inputs. This box in turn points to the second box, the one discussing Morningstar turning inputs into allocations, completing the circle.

So, how does this work in practice?

Image on screen:  The video zooms in on the far left-hand box on the flow chart that shows how myTDF works in practice. This box notes how the recordkeeper sends key participant inputs. Below the box, the inputs are listed as follows: age, salary, account balance, employer contribution rate, and employee deferral rate.

First: After a participant enrolls or is defaulted into myTDF, the recordkeeper securely sends their data to Morningstar. This includes their date of birth, salary, retirement account balance, as well as the participant’s savings and company match rates.

Image on screen:  The video zooms in on the second column of the flow chart that shows how myTDF works in practice. This includes the top box, which notes that PIMCO provides the algorithm output containing an extensive set of glide path allocations and portfolio mappings to Morningstar (i.e. the myTDF engine). This box has an arrow below it pointing down to a box that highlights how Morningstar processes the inputs through the myTDF engine to output the optimal allocation and portfolio mapping for each participant. The hypothetical allocation, shown as a pie chart. 

Second: Morningstar runs the participant’s data through PIMCO’s proprietary glidepath model, which generates an asset allocation that is personalized for the participant. This information is then securely sent back to the recordkeeper.

Image on screen: The video zooms in on a portion of the previously described horizontal flow chart that shows how myTDF works in practice. The highlight is of a box on the far right of the flow chart, which notes that the recordkeeper executes the allocations. The video then zooms back out to the main diagram of the flow chart. The text “Process repeats quarterly or any time an employee joins/leaves the plan” appears below the diagram.

Then lastly, recordkeeper executes the trades to implement the participant’s personalized portfolio.

This process is repeated on a quarterly basis to ensure any changes, such as a pay increase or balance change, are automatically captured and considered in the participant’s allocation over time.

Image on screen:  With a view of the horizontal flow chart that shows how myTDF works in practice, the video zooms in on the second box from the right of the flow chart, which notes how allocations are mapped to combinations of existing PIMCO RealPath Blend Collective Investment Trusts.

Now, what are the actual investments being used to build participant portfolios? 

We use PIMCO’s RealPath Blend target date collective investment trusts as the building blocks for myTDF, combining different vintages to implement the personalized glide path.

Text on screen: TITLE – Vintage blending:

Image on screen:  The video shows a graphic resembling a chart with five side-by-side bars, made up of stocks and bonds, labeled 2060, 2045, 2040, 2030, income, which combine into one bar. Bulleted text then appears to the right listing the asset classes: U.S. Fixed income, Global bonds, Long treasuries, Long TIPS, TIPS, Emerging market bonds, High yield, Commodities, Real estate, Non-U.S. stocks, U.S. small cap stocks, U.S. large cap stocks, Emerging market stocks. Additional bulleted text appears to the right explaining how MyTDF builds a more precise glidepath, that there’s no need to change the core menus, and how it follows a similar benchmarking process.

We call it vintage blending. Why is this important?

By using RealPath Blend Target Date CITs, we can access asset classes that may not be available on the plan’s investment menu. That allows us to build a more precise glidepath for each participant. Plus, plan sponsors don’t need to change their core menus to accommodate myTDF.

In addition, benchmarking is simple. Plan sponsors who are familiar with traditional TDFs can follow a similar benchmarking process for myTDF.

Target date funds have deservedly become the QDIA of choice for most plan sponsor’s due to their simplicity and ability to cater to a broad group of participants. myTDF offers a more personalized approach to target date funds, while still preserving the simplicity that has made them so popular today. 

Text on screen: For more insights and information, visit pimco.com

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Disclosure

PIMCO and myTDF ® are trademarks of Allianz Asset Management of America LLC in the United States and throughout the world.

myTDF is offered by Pacific Investment Management Company LLC, a registered investment adviser, and is intended for citizens and legal residents of the United States and its territories. Investment advice generated by myTDF is based on information provided and limited to the investment options available in the defined contribution or defined benefit plan. Projections and other information regarding the likelihood of various retirement income and/or investment outcomes are hypothetical in nature, do not reflect actual results, and are not guarantees of future results. Results may vary with each use and over time. myTDF may be covered by one or more U.S. or international patents.

myTDF is a defined contribution or defined benefit plan solution that allows a plan participant to personalize their target date fund allocation across multiple vintages based on participant inputs using PIMCO proprietary funds. An investment in myTDF through your plan will be allocated to the PIMCO REALPATH® Blend Income Collective Trust Series and PIMCO REALPATH® Blend Completion Collective Trust, a series of PIMCO Collective Investment Trust.

The PIMCO REALPATH® Blend Income Collective Trust and PIMCO REALPATH® Blend Completion Collective Trust are part of a series of the PIMCO Collective Investment Trust. SEI Trust Company serves as the Trustee of the Trust and maintains ultimate fiduciary authority over the management of and the investments made in the Trust. The Trustee is a trust company organized under the laws of the Commonwealth of Pennsylvania and wholly owned subsidiary of SEI Investments Company. The PIMCO Collective Investment Trust is a trust for the collective investment of assets of participating tax qualified pension and profit-sharing plans and related trusts and governmental plans as more fully described in the Declaration of Trust. The terms of the plan and Declaration of Trust are incorporated by reference and should be reviewed for a complete statement of its terms and provisions. The PIMCO Collective Investment Trust is managed by SEI Trust Company, the Trustee, based on the investment advice of PIMCO, the investment adviser to the Trust. SEI Trust Company has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act and, therefore, is not subject to registration or regulation as a pool operator under the Act. As a bank collective trust, the Trusts are exempt from registration as an investment company.

Please call SEI Trust Company to obtain a copy of the Trust’s Disclosure Memorandum. Investment objectives, risks, charges, expenses and other important information about the Trust are contained in the Trust’s Disclosure Memorandum.

The Trust is not FDIC-insured, may lose value and is not guaranteed by a bank or other financial institution. Neither the Trust nor the units representing beneficial interest therein are registered with SEC.

Glide Path is the asset allocation within a Target Date Strategy (also known as a Lifecycle or Target Maturity strategy) that adjusts over time as the participant’s age increases and their time horizon to retirement shortens. The basis of the Glide Path is to reduce the portfolio risk as the participant’s time horizon decreases. Typically, younger participants with a longer time horizon to retirement have sufficient time to recover from market losses, their investment risk level is higher, and they are able to make larger contributions (depending on various factors such as salary, savings, account balance, etc.). Generally, older participants and eligible retirees have shorter time horizons to retirement and their investment risk level declines as preserving income wealth becomes more important.

Target Date Funds are designed to provide investors with a retirement solution tailored to the time when they expect to retire or plan to start withdrawing money (the "target date"). Target Date Funds will gradually shift their emphasis from more aggressive investments to more conservative ones based on their target dates. Target Date Funds invest in other funds and instruments based on a long-term asset allocation glide path developed by PIMCO, and performance is subject to underlying investment weightings, which will change over time. An investment in a Target Date Fund does not eliminate the need for an investor to determine whether a Fund is appropriate for his or her financial situation. An investment in a Fund is not guaranteed. Investors may experience losses, including losses near, at, or after the target date, and there is no guarantee that a Fund will provide adequate income at and through retirement.

The funds invests in other funds and performance is subject to underlying investment weightings which will vary.

PIMCO as a general matter provides services to qualified institutions, financial intermediaries and institutional investors. Individual investors should contact their own financial professional to determine the most appropriate investment options for their financial situation. This material contains the current 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 LLC. in the United States and throughout the world. Pacific Investment Management Company LLC, 650 Newport Center Drive, Newport Beach, CA 92660, 800-387-4626. ©2023, PIMCO

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