In a panel of TDF providers at the 401konvergence conference in New York this week, managers from JP Morgan, MFS and Franklin Templeton were asked to opine about the next generation of QDIAs. When asked about passive TDFs, one panelist suggested that there is no such thing, since the manager has to choose the glide path even if all the building blocks are all passive.
Though no brilliant revelations were offered about the next generation of QDIAs, two suggestions that seemed to dominate the conference, along with the “fixation” on fixed income, were custom asset allocation funds and the use of alternatives. Panelists said that the use of illiquid alternatives could close the gap between returns of DC and DB plans. Investors and plan sponsors may have to choose between either better or cheaper, since alternatives can be more expensive than other investment classes.
Proprietary TDF managers are often forced to defend the use of their managers only, but one panelist refused to do so, saying that performance should be the judge. After the session, that same panelist suggested that mixing proprietary funds with outside managers may run afoul of ERISA, forcing a manager to select investments that may benefit his or her firm more.
