arrow_backReturn

1Q20 TDF GlidePath Changes

As we’ve talked about in a couple previous posts, TDF issuers have the right to alter their glide path at any given time. Any given quarter may see numerous or few (if any) changes within the industry. Despite the tumultuous market in the 1st quarter, the industry saw minimal glide path changes.

Avatar

By Clayton Fresk on May 21, 2020



As we’ve talked about in a couple previous posts, TDF issuers have the right to alter their glidepath at any given time. Any given quarter may see numerous or few (if any) changes within the industry. Despite the tumultuous market in the 1st quarter, the industry saw minimal glidepath changes.

 

As review, the changes are at the target level, not the actual allocation. While for many issuers the target and actual are very similar if not one in the same, other issuers have a degree of freedom to deviate from the stated glidepath. The amount of deviation can vary; for example, various issuers allow managers a +/- 10% dynamic window in which to operate. Other issues have alternate mandates to which glidepath deviation can occur, such as volatility targets at certain points along the path.

 

But in terms of target level changes on the quarter, there was really only one issuer who changed.

 

T.Rowe Price

 

In February 2020, T.Rowe Price announced they were increasing equity across most of the glidepath for both of their glidepaths.  T.Rowe offers a more aggressive glidepath, in which most of their AUM falls.  However, they also offer a more conservative glide path which also increased equity.  Additionally, Mass Mutual has a series subadvised by T.Rowe Price, which follows the more aggressive glide path and hence also increased equity.

 

Here is the 1st glidepath:

 


Chart Source: Stadion

 

Most of the glidepath experienced a 10% increase in equity, except for investors right before retirement who saw no change.

 

Here is the 2nd glidepath:

 


Chart Source: Stadion

 

The 2nd glidepath also saw a 10% increase for younger investors but given the more conservative nature of the glidepath (lower equity), the changes in the other portions of the glidepath were less pronounced.

 

Additionally, this target change may not be instantaneous, as per the prospectus T.Rowe plans to implement the changes “within the next two years”.  From holdings analysis, it looks like they implemented a partial change during the 1st quarter, with both glidepaths having a marginally higher equity allocation as compared to 4th quarter 2019.

 

After the 2007-2009 bear market, the industry saw various issuers lower the amount of equity in their glidepaths as a reaction.  After experiencing 10+ years of a bull market since then, we’ll see if this most recent bear market also has some issuers reducing equity in the forthcoming quarters.

 

Avatar

Author: Clayton Fresk

Clayton Fresk joined Stadion Money Management in 2009 and currently serves as Portfolio Manager of Stadion’s Retirement investment strategies, which comprises oversight of Stadion’s managed account, target-date, and risk-based strategies. He provides thought leadership for Stadion’s participant level, customized retirement solutions, in order to ensure that its glide path technology and asset allocation are able to support all intermediaries in the defined contribution ecosystem. Clayton holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Minnesota. He also received an MBA degree and a Bachelor's degree in Finance & Marketing from the University of Minnesota.

1Q201Q2020Glidepath ChangesT.Rowe PriceTDF
Avatar
Written By:

Clayton Fresk

Clayton Fresk joined Stadion Money Management in 2009 and currently serves as Portfolio Manager of Stadion’s Retirement investment strategies, which comprises oversight of Stadion’s managed account, target-date, and risk-based strategies. He provides thought leadership for Stadion’s participant level, customized retirement solutions, in order to ensure that its glide path technology and asset allocation are able to support all intermediaries in the defined contribution ecosystem. Clayton holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Minnesota. He also received an MBA degree and a Bachelor's degree in Finance & Marketing from the University of Minnesota.


There is no guarantee of the future performance of any Stadion account. Material has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Results based on available universe of Target Date Fund Series, which includes registered mutual funds, and non-registered collective investment funds and insurance accounts. Collective investment funds and insurance accounts are only available for investment to qualified retirement plan assets such as 401(k) plans.

 

The commentary, analysis and opinions expressed are those of Stadion’s Investment Team. The commentary, analysis and opinions referenced are as of the date of publication and are subject to change without notice. This material is for informational purposes only and should not be considered investment advice. This is not a recommendation to buy or sell a particular security. The investment strategy or strategies discussed may not be suitable for all investors.

 

This document may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Stadion’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.

 

Investors must make their own decisions based on their specific investment objectives and financial circumstances. Stadion Money Management, LLC (“Stadion”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Stadion’s investment advisory services can be found in its Form ADV Part 2, which is available upon request.

 

©2019 Stadion Money Management, LLC. All rights reserved. Stadion and the Stadion S are registered service marks of Stadion Money Management, LLC. StoryLine is a service mark of Stadion Money Management, LLC.

 

SMM-052020-342