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October 06, 2020 | Pension Solutions

Investment Flows in Retirement Plans and the Impact on Plan Design

There was an historic surge of investment flows into capital preservation funds in participant-directed retirement plans in the first quarter of 2020 as investors braced for market volatility related to the COVID-19 pandemic. To prepare for how retirement plan participants may be reinvesting their accounts as markets recover, we have been monitoring reports of recent investment flows and reviewing historical investment flows to glean insights.

Despite the initial investor flight to safety earlier this year and the equity market’s subsequent rebound to new highs, net new investments in participant-directed retirement plans have not flowed to equity asset classes. And we may continue to see headwinds for net new investment flows into equity asset classes by retirement plan participants.

Additionally, while target-date funds and other asset allocation funds have received significant net new investment over the past decade, the target date funds closer to retirement are experiencing outflows for distribution and/or rebalancing. 

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We seek to help DC plan sponsors balance multiple goals, including driving principal stability, daily liquidity and competitive yields, and delivering solutions that position participants for successful retirement.