Solving the TDF Scorecard Methodology Puzzle

The RPAG Scorecard has a unique methodology for passive, active, and asset allocation funds. While passive funds emphasize fees and tracking error, the other two are broader and more complex. The asset allocation methodology has almost similar metrics as the active methodology, but uses custom benchmarks and peer groups given the highly diverse nature of these types of funds. Watch the video and comprehensive understanding of how we evaluate target date funds for your clients, and resources that will help you stand out from your peers.

• Matt Giovinazzo, Director, Investment Management

• Target Date Funds are not directly comparable in terms of their returns. What you can do is line up TDFs with similar glide path or equity exposure, but it is very difficult and nearly impossible to compare two series against each other and very difficult to compare a TDF to an industry standard benchmark and get meaningful results in terms of how well the TDF performed
• Risk Index: Determines risk category with a combination of factors. Essentially, it's the equity throughout the glide path. A lot of it is equity at retirement, which is a participant's riskiest point when they are no longer going to live off of their income, but off of this fund. It looks at how quickly the glidepath is transitioning from stocks to bonds getting at the whole concept of sequencing risk
• DOL Tips:
  • Fiduciaries should know or understand their underlying investments that make up TDFs. This is a level of analysis that is currently unique to RPAG
  • Align TDF and participant characteristics
  • Review fees and investment expenses
  • Consider custom or non-proprietary options
  • Develop effective employee communications
  • Document the process
• You should not only rely on our categorization, which is a good starting point, but think about what is best for that particular workforce and demographic 
• It comes down to:
  • Is this right?
  • Can participants stand this volatility?
  • Do they need this much risk based on their savings rates?

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