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Josh Cohen, defined contribution practice leader, Russell Investments

Russell launches ‘next generation’ of target date investing for institutional plan sponsors

Global asset manager Russell Investments has leveraged the methodology in Russell Adaptive Investing to develop the “next generation” in target date investing for institutional plan sponsors – Russell Adaptive Retirement Accounts.

Russell Adaptive Retirement Accounts are designed to improve a participant’s ability to develop a path of personalised, optimal asset allocations that change based on factors beyond age.

“For good reasons, target date funds are the most popular default option used by DC plans as well as one of the most important innovations for DC plans in the last decade. Yet today’s institutional offerings are not entirely adequate because they are designed for the ‘typical’ participant using a pre-determined asset allocation strategy centred solely on a participant’s age, without taking into account an individual’s investment requirements or retirement income goals,” says Josh Cohen (pictured), defined contribution practice leader. “Using Russell Adaptive Investing, we have the ability to incorporate individual participants’ specific demographics and investment experience into the asset allocation modelling and improve the likelihood that they will achieve their specific targeted retirement income.”

Russell Adaptive Retirement Accounts provide a way for DC sponsors to further enhance their plans’ default options by leveraging existing investment options and drawing on participant information that can be made available from their recordkeepers (e.g. age, savings deferral rate, current account balance, salary and DB pension benefit) to determine the appropriate asset allocation for each participant based on how on-target they are toward meeting their specific retirement income goal.

“Russell Adaptive Retirement Accounts combine some customisation elements of a managed account service – typically at a lower cost to the participant – with the benefits of traditional target date funds. Plan sponsors benefit because Russell Adaptive Retirement Accounts are in line with QDIA requirements, while participants receive tailored, well-diversified asset allocations that take into consideration their unique financial situations and personal market experiences,” says Dick Davies, managing director, defined contribution. “This can all be done without direct participant involvement, since the necessary information already resides with the record-keeper or on the plan sponsor’s human resources system. We believe this next generation of target date investing will be a significant step forward in helping participants increase their probability of reaching their retirement goals.”

Russell partnered with Business Logic, a provider of online investment solutions, to customise their existing secure technology platform with the capability to personalise and automate the methodology in Russell Adaptive Investing for individual participants enrolled in DC plans by drawing on record-keeper data. Russell will continue to work with Business Logic on an ongoing basis to maintain the platform.

Beyond the Russell Adaptive Retirement Accounts, Russell has also leveraged Russell Adaptive Investing for a retail audience with the recent launch of the Russell Retirement Lifestyle Solution, a planning and investment programme designed to help build portfolios specifically around retirement goals. Available only through financial advisers, and to clients for whom it is appropriate, the programme features an adaptive investment model strategy that aims to maintain a client's funded status above 100 per cent in retirement.

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