PIMCO, the Newport Beach, Calif.-based investment management firm and provider of retirement solutions, has recently introduced Pimco RealRetirement Funds, a series of funds that aim "to help retirees stay ahead of inflation by maximizing their purchasing power," the company says. Pimco has some $750 billion in assets under management and is owned by Allianz Group; its funds are distributed by Allianz Global Investors.
Pimco's Survey of Investment ConsultantsOther findings of the recent research found:69% have a dedicated DC team,62% use their own proprietary asset allocation models, 66% say a liability-driven investment approach is applicable within a DC plan; and 67% report that plan sponsors are somewhat to highly likely to add a guaranteed income option within their DC plan, with a Guaranteed Minimum Withdrawal Benefit most likely.
Source: Pimco 2008
Pimco RealRetirement Funds are "target date" funds and automatically rebalance portfolios as they move toward the investor's expected retirement date. "Unlike many of the target date products in the market today, Pimco's retirement solutions focus on facilitating adequate retirement purchasing power, which is the primary success factor of many plan sponsors," says Stacy Schaus, senior vice president and head of Pimco's Defined Contribution Practice. "An additional important element to Pimco's approach is reducing volatility by incorporating a broader range of asset classes, especially as the fund moves closer to its target date."
The new retirement funds incorporate Treasury Inflation-Protected Securities (TIPS), commodities and real estate "to help investors grow their wealth while maintaining purchasing power," the investment firm explains. The approach of these new Pimco funds incorporates the company's risk-management strategies as well as a retirement "glide path," Pimco's allocation process that adjusts the risk profile of the portfolio over time. "The glide path approach aims to maximize real return and capital preservation during the accumulation years and to produce reliable income during the retirement years," according to the company.
The five retirement funds have target retirement dates for 2010, 2020, 2030, 2040 and 2050. Each of the funds of funds includes allocations of various Pimco funds that include or have exposure to domestic and international securities as well as real assets such as TIPS, real estate and commodities.
"Pimco's RealRetirement Funds differ from products in the market today because of our focus on reducing risk, particularly from inflation," Schaus explains. "We believe Pimco 's RealRetirement Funds are attractive for sponsors of defined contribution retirement plans who focus on retirement income replacement."
In a recent survey conducted by Pimco, nearly 80 percent of investment-consulting firms polled believe defined contribution retirement plans, such as 401(k)s, will increasingly default participants into target date investment strategies. More than two-thirds of the firms actively promote the value of custom target-date strategies, typically created using a mix of core investment offerings in the DC plan. Glide-path management is offered by 76 percent, 95 percent accept fiduciary responsibility, and 55 percent are willing to act as an investment manager.
"Given the ever-increasing dependence on DC plans as the primary source of retirement income, we're finding that consulting firms are bringing their most sophisticated asset allocation capabilities to plan sponsors," says Schaus.
According to Pimco, most consultants (90 percent) believe plan sponsors should consider creating their own custom strategies, once plan assets exceed $1 billion. Even at $200 million in assets, more than 60 percent say custom strategies may make sense for DC plans.
Janet Levaux, MBA/MA., is the managing editor of Research; reach her at email@example.com.