J.P. Morgan to Retirement Plan Sponsors and Advisors: Three Questions to Assess the Strength of Target Date Fund Fixed Income Allocations

NEW YORK, May 11, 2017 /PRNewswire/ -- J.P. Morgan Asset Management today released a new Retirement Insights paper, "Three questions for assessing a target date fund's fixed income allocation." The piece examines the critical role of fixed income assets in target date funds, highlighting ways they can help generate strong risk-adjusted returns and manage volatility.

"The fixed income allocation can be a key differentiator among target date strategies, but its structure and management do not always get the attention they deserve within the TDF selection process," said Dan Oldroyd, Portfolio Manager and Head of Target Strategies, J.P. Morgan Asset Management. "Strategies may vary across plan sponsors based on participant needs. However, when selecting the best TDF for participants, plan sponsors should consider three things: Is the fixed income portfolio sufficiently diversified?; does the fixed income manager have the flexibility to enhance risk-adjusted returns?; and can the TDF's fixed income portfolio help weather a rise in interest rates or other changes in the economic and investment environment?"

Key findings include:

• A well-diversified fixed income allocation may be able to deliver more consistent risk-adjusted returns across a range of investment environments than a more narrowly diversified, concentrated allocation confined to those fixed income indices that can be efficiently replicated.
• Skilled active fixed income managers generally have greater flexibility and more tools than passive managers for generating strong risk-adjusted returns over time. Replicating a fixed income index can be more complex, costly and subject to structural bias, and involve more active decision-making, than some investors realize.
• Interest rates are widely expected to climb higher. Plan sponsors should ensure TDF strategies can adapt to such changes and represents a reasonable compromise between controlling costs and providing participants with the potential for a smooth path to a financially secure retirement.

To learn more about J.P. Morgan Asset Management's leading defined contribution investment strategies, product innovations, resources and Retirement Insights program for advisors and plan sponsors, please click here, or view the full paper "Three questions for assessing a target date fund's fixed income allocation" by clicking here.

About J.P. Morgan Asset Management

J.P. Morgan Asset Management, with assets under management of $1.5 trillion, is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. JPM, the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.5 trillion and operations worldwide. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com. 

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SOURCE J.P. Morgan Asset Management