Target Date Fund Analytic Training

CFDD 2012 ADVISOR CONFERENCE
PRE-CONFERENCE TARGET-DATE FUND ANALYTIC TRAINING
The Swissotel
Chicago, IL

2nd Floor, Event Center
Sunday, October 21, 2012
3:30 pm - 7:00 pm

Target-Date mutual fund assets have grown to more than $425 billion in a short period, but asset allocation funds of  all types and vehicles are  in excess of $1 trillion. While these asset allocation solutions are expected to continue growing  and become the dominant investment category, Target-Date Fund (TDF) due diligence is seriously lacking.

Given the consolidation of DC plan assets by TDFs, advisors must become TDF experts and asset allocation specialists. At a minimum, plan sponsors and advisors must be able to explain to the DOL why they selected a particular TDF.

To fulfill their responsibilities, retirement plan fiduciaries are in need of new, effective and easy to use TDF evaluation tools. Unfortunately, no independent single source solution to help fiduciaries evaluate, select and monitor TDFs currently exists.

CFDD '12's pre-conference agenda was designed to meet this need by providing hands-on training to some of the newest and most recently enhanced online TDF analytic tools, including PIMCO’s RealPathTarget Date Glide Path analyzer, the Target-Date Tool Set by Allianz Global Investors and JP Morgan’s soon to be enhanced Target-Date Compass tool.

A LACK OF STANDARDS, BENCHMARKS & MPT LIMITATIONS

While safe harbor status provides an incentive for plan sponsors to offer TDFs as their default option, fiduciaries are required to document the prudent selection and periodic monitoring of their plan level investment choices, including QDIAs.

The aforementioned is no small feat because TDFs are complicated, evaluation standards have not developed and standardized benchmarks are lacking.  The industry has been reluctant to abandon traditional evaluation methodology and this has precluded sponsors from re-evaluating their TDF choices.

The development of TDF analytic tools has been slowed by the inconsistency of design, confusion over the “to” vs. “through” glide path approaches, the wide variation in risk levels and a general lack of transparency.

Given that it is the primary driving force behind performance and volatility, understanding the glide path strategy is at the core of TDF analysis. While most glide paths are geared towards one type of market environment, forward looking stress testing under various market conditions is required for meaningful evaluation. Unlike backward looking Mean Variance Optimization, Risk Factor Analysis utilizes forward looking assumptions to measure risk.

Some traditional screening characteristics are still relevant, including management tenure, inception date, fees and assets under management. The uniqueness of TDFs does, however, require additional considerations beyond management’s philosophy and strategy.

Traditional analytics were designed to compare individual strategies within a measureable benchmark. MPT has its place, but traditional analytics are not appropriate for asset allocation services, i.e., Target-Date Funds. Traditional analytics also fail to provide detailed clarity of the underlying asset classes.

Before starting the analytic process, sponsors and their advisors should ascertain the plan's tolerance for risk, the purpose of offering a TDF and participant behavior. Using a five year pre-target date  window  to narrow risk  certainly makes sense, but it is important to note that target equity allocations do not capture all the  risk factors, including credit and duration risk.

AGENDA

Montreux Ballroom
3:30 – 4:30 pm		Aligning TDFs With Sponsor & Participant Needs (CFP 1.0)
		- Michael Miller, National Sales Manager, DCIO, J.P. Morgan Asset Management
Asset allocation solutions are consolidating DC plan assets in a major way, but Target Date Fund evaluation standards have not yet developed. As competition increases and the menu of available solutions expands, the need for a systematized approach to evaluation and selection has intensified. To ensure that TDF solutions meet plan level objectives and participant needs, each of which differs by plan, fiduciaries are under increased scrutiny. This session will review the legal and fiduciary landscape affecting plan fiduciaries today. Based on recent upgrades, we will also demonstrate a first-of-its-kind tool that advisors can use to help plan fiduciaries categorize, analyze and evaluate TDFs that are aligned with the specific needs of sponsors and their participants.
Montreux Ballroom
4:30 – 6:00 pm		The Evolution Of Asset Allocation From MPT To Risk Factors (CFP 1.0)
		- Sean Murray, Sr. VP, national Retirement Sales Manager, PIMCO - Reagan Pettey, Partner, Alliance Benefit Group of Houston, Inc. - Matt Gulseth, Partner, Channel Financial - Rick Unser, ERISA Risk Management, Lockton Financial Advisors, LLC
Differentiation in an evolving retirement landscape has become increasingly challenging for advisors and the proliferation of strategies has made it difficult for plan sponsors to evaluate and compare Target Date Funds. Traditional portfolio construction that focuses on asset class diversification may also fall short of meeting participant goals. This session will look beyond asset class labels and focus on risk factors, the underlying elements that affect the value of an asset. Exploring traditional portfolio construction, we will answer why traditional asset class diversification isn't sufficient. We will also define risk factors, explain how risk factor-based allocations work and demonstrate how advisors can apply them to their portfolios. In addition to the PIMCO introduction, a panel of distinguished advisors will show how they use risk factor analysis to differentiate their value and share best practices on how they leverage analytic tools, like PIMCO's RealPATH, to enhance their practice.
Montreux Ballroom
6:00 -7:00 pm		The Newest, Fully Customizable, Web-Based Tool For TDF Evaluation
		- Glenn Dial, Head of US Retirement Distribution, Allianz Global Investors
With prudence in mind, the Target-Date Tool Set by Allianz Global Investors was designed to help sponsors understand the difference between “To” and “Through” strategies, determine which is more appropriate and cull the number of Target-Date Funds to those that match plan objectives and participant behavior. In addition to providing customized competitive reports, the new tool facilitates the documentation of the entire process. To distinguish yourself and help your clients select the right Target Date Funds, join us for a tutorial of the Target-Date Tool Set, a new and fully customizable web-based tool.

For more information on the Target-Date Compass, RealPath and the Target-Date Tool Set, see pages 3-5 of the CFDD’s Target Date Funds Research at: http://www.thecfdd.com/ExclusiveDCPlan-TargetDateFundsResearch.

REGISTRATION

The CFDD’s exclusive pre-conference training is limited to conference registrants. All attendees must check into the registration desk and don their name badges before entering these training sessions.

The pre-conference training seating is limited. To ensure your place at the table, confirm your pre-conference registration by emailing CFDD@TheCFDD.com.

The NASCAR themed Kick-Off Party will commence immediately after the pre-conference training ends at 7:00 pm on Sunday evening, 10/21/2012.

For more information on the 2012 conference, go to: http://www.thecfdd.com/CFDDconference2012.