PIMCO Updates Its 2022 Glide Path for Target Date Funds
PIMCO’s glide path for target date funds expresses the firm’s collective view on age-appropriate asset allocation that can help prepare defined contribution (DC) plan participants for successful retirements. The glide path is reviewed annually based on the latest information on asset valuations, modeling enhancements, DC savings trends, and PIMCO’s asset allocation views. The new 2022 glide path has a slightly higher allocation to equities, and a lower exposure to long duration and core bonds.
In the following Q&A, senior members of PIMCO’s glide path leadership team discuss the key objectives, investment processes, and results from our recently concluded review. Erin Browne is a managing director and asset allocation portfolio manager who oversees the glide path team. Steve Sapra and Niels Pedersen are executive vice presidents and senior members of PIMCO’s quantitative research team.
Q: WHAT ARE THE OBJECTIVES OF THE PIMCO GLIDE PATH?
Browne: Our glide path aims to balance the key objectives of wealth maximization, diversification, and retirement income. The glide path’s asset allocation seeks to optimally balance the trade-off between inflation-adjusted retirement income and income volatility. To achieve sufficient retirement income, a portfolio should generate adequate risk-adjusted returns over the long term and use a diverse array of investments to realize robust outcomes across a variety of economic conditions (see Figure 1).
Figure 1: PIMCO’s 2022 glide path
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Q: HOW DOES THE GLIDE PATH REVIEW PROCESS WORK?
Pedersen: The annual glide path review process is rooted in PIMCO’s overall investment process, and benefits from the firm’s over 50-year history of managing risk and delivering returns across a wide range of market environments. The process starts with our secular and cyclical forums, where PIMCO investment professionals debate and formulate our outlook on growth, inflation, risks, and opportunities across the globe. We also invite outside experts to help us avoid blind spots and mitigate biases. (See our January Cyclical Outlook.)