Let me start with some background. Model portfolios offer risk-based options to participants consisting of asset allocations comprising many of the core funds already in the plan. Target date funds are portfolios designed to achieve returns based on a participant’s target retirement date; those closer to retirement will typically have less exposure to equities and commensurate expectations of lower investment returns, while those further from retirement will be exposed to more risk and a higher potential investment return.
InvestMap is a great solution for participants and employers alike because it brings together the benefits of both target date funds and model portfolios. Conceptually, target date funds are a good idea, but product orientation and lack of customization have underscored their limitations. Specifically, target date funds take somewhat of a “catch all” approach at the plan level.
InvestMap is designed to work at the participant level, incorporating the best aspect of target date funds (the automated glide path for which equity exposure is reduced over a period of several years). However, personal risk attributes of individual participants are incorporated as well. This sophisticated “marriage” between risk-based models and an age-based target date glide path, coupled with an open architecture investment platform, provides the best of both worlds for plan sponsors and participants.
The core funds are still available for participants to select their own asset allocations if they choose not to participate in InvestMap.
Advantages to the plan sponsor:
• InvestMap offers fiduciary protection for the construction of the models
• Can be used as the plan’s qualified default investment alternative (QDIA)
• Investment management fee transparency and no additional costs
Advantages for participants:
• Investment education that is easily understood
• Personalized strategies for each participant’s individual risk tolerance
• Hands-off management from initial enrollment to retirement
Please contact your Milliman representative for more information on how InvestMap could benefit your plan.