JPMorgan SmartRetirement Explores Consequences of Risk Prioritization in Target Date Funds

NEW YORK, March 25, 2015 /PRNewswire/ -- J.P. Morgan Asset Management today released a new, in-depth research report that examines the unintended consequences of selective risk prioritization in target date fund portfolio construction. The comprehensive white paper, "Off Balance," clearly outlines the risks inherent in the defined contribution (DC) model to help plan sponsors and their advisors identify and address current challenges to participants' retirement security.

"As target date funds continue to garner an increasing percentage of 401(k) contributions, it is critical plan sponsors understand how differently they may manage risk over time," said Anne Lester, Global Head of Retirement Solutions and 2014 Morningstar U.S. Fund Manager of the Year¹ for the JPMorgan SmartRetirement suite of target date funds. "We were especially interested in evaluating the various risk management approaches given the broad and rapidly growing adoption of these strategies in DC plans."

The target date-focused study illustrates the dynamic and multifaceted risks inherent in investing for retirement. The research groups these potential risks into two categories: participant-controlled risks (which include withdrawal risk, accumulation risk and participant-user risk) and participant-experienced risks (which include market risk, event risk, interest rate risk, inflation risk and longevity risk). It heavily concentrates on participant experienced risks and how these may affect outcome potential both positively and negatively.

"We continue to believe that target date funds are the most prudent investment choice for most participants," said Dan Oldroyd, JPMorgan SmartRetirement Portfolio Manager. "However, it is equally important to understand how risk prioritization can impact a glide path and ultimately detract from expected retirement outcomes. Our findings show that now, more than ever, plan sponsors must consider how risk prioritization may cause a target date fund to respond over a 40-plus-year time horizon."

To view the full analysis examining the potential ways risk prioritization could significantly shape participant outcomes, please click here.  

1The 2014 U.S. Allocation Fund Manager of the Year was awarded to the SmartRetirement team for the management of the JPMorgan SmartRetirement Target date Series (Institutional Shares)

About J.P. Morgan Asset Management

J.P. Morgan Asset Management, with assets under management of $1.6 trillion, is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world.  J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity.  JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.4 trillion and operations in more than 60 countries.  Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.

J.P. Morgan Asset Management, is a leading provider of comprehensive retirement solutions and is dedicated to improving individual retirement outcomes.  The firm has defined contribution assets under management of nearly $138 billion, as of December 31, 2014.

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide.

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SOURCE J.P. Morgan

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