Global investment firm AllianceBernstein has launched a bespoke range of funds for defined contribution (DC) schemes.
The funds combine features from the traditional approaches of lifestyling and balanced (diversified growth) strategies.
The AllianceBernstein Customized Retirement Strategies is aimed at DC pension members who do not have the time or inclination to make investment decisions and hence end up in the default fund where the decisions are made for them.
AllianceBernstein research suggests an age-based approach toward default funds, de-risking as a member approaches their expected retirement date, could deliver significantly improved outcomes over traditional balanced strategies and lower risk than a traditional lifestyle approach.
Claude Chene, chief executive officer, AllianceBernstein, said: “By taking on the key investment decisions through a diversified age-based approach, our strategy will improve results for the majority of DC members who do not want to make their own investment decisions.
“With millions of new DC pension savers likely to emerge following the introduction of the National Employment Savings Trust from 2012, we believe our approach will set the standard for the DC industry.”
Customized Retirement Strategies is a range of ‘age-based’ funds which progressively de-risk as the scheme members get older.
The member invests in the target date fund maturing closest to their expected retirement date.
AllianceBernstein then takes responsibility for the ongoing asset allocation, across a diverse range of investments, incorporating the firm’s best thinking in line with the changing needs of members as they age, and the evolving market and regulatory environment.
Rather than having to swap between the many funds typical in a traditional lifestyle approach, the portfolio adjusts seamlessly within a single fund as the member gets closer to retirement.
This tailored approach to DC investment also eases the administrative load on trustees and sponsoring employers by freeing them from the burden of continuously implementing changes in the DC plan.
Reducing operational risk and increasing flexibility aligns all parties’ interests since quick and easy implementation means decisions can be made on the basis of whether they are good for members, not on how easy they are to put into practice.
Customized Retirement Strategies target date funds are open-architecture, giving trustees and sponsoring employers the flexibility to select their own investment managers, and are tailored to meet the needs of individual plans rather than built to one uniform design.
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