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Investment Choices in DC pension plans - what asset classes should you offer?

Many of our most popular DC pensions ask what fund choices should be on offer.

Here are six papers which explore a variety of different fund ideas, including ETFs, Liquid Alts and Real Estate.

1. Should you offer ETFs in your DC plan? (Vanguard)

Index funds have become a popular investment option for DC pensions plans. Would it make sense to offer the same via indexed exchange-traded funds?

2. The Case for Liquid Alternatives in Defined-Contribution Plans (Neuberger Berman)

This report provides an overview of the liquid alternatives market, the factors that fiduciaries should consider before including liquid alts in a DC plan, and examines a range of implementation strategies.

3. Private Market Real Estate Investment Options for Defined Contribution Plans - New and Improved Solutions (Hewitt, 2015)

Ths paper argues the case for a Real Estate investment option, designed to meet the valuation and liquidity needs of DC pensions.

4. Align the Design: Considering and Evaluating Target-Date Glide Paths (PIMCO, 2015)

PIMCO present the "Objective-Aligned Glide Path", which aims to provide the best possible investment return within the constraints of minimizing the mismatch with the retirement liability. This glide-path, PIMCO believes, wil increase a members odds of retiring when intended and with adequate retirement income.

5. US DC Investment Choices - What Is This Doing to Young Investors? (Research Affiliates)

Unfortunately, DC pension plans are not always used in the way they were intended. Often they are cashed in by young workers; effectively used as an emergency fund.Rob Arnott argues that the DC choices available should recognise this.

6. Designing DC Pensions - Employees Want More (Northern Trust, 2015)

According to this paper from Northern Trust, DC plan sponsors should offer investment options which are designed specifically for retired members. This would have the benefit of allowing retirees access to professional advice, and perhaps giving them a variety of standard "in-retirement" choices.

7. How custom DC investment options improve participant success (Aon, 2015)

How can DC plan sponsors remodel the DC plan design, so that investment decisions are taken more expertly and responsibly? With the professionalism of DB plans in demise, is it possible to transfer some of that institutional quality to the management of DC plans? Aon presents the argument that this is possible.

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