Investment Strategies Designed for a Complex Retirement Landscape


Target-Date Retirement Strategies from T. Rowe Price
Deep experience. Thoughtful innovation.

A complex investment landscape

It’s a simple, but unsettling reality: many workers are not financially prepared for retirement. Individual investors face the systemic risks of inflation and market volatility, while longer lifespans and behavioural hazards—under­saving and overspending—compound the challenge. At the same time, employers and other pension authorities face an evolving landscape of fiduciary responsibilities, regulatory changes, budget constraints, and other plan-specific priorities. In such a complex environment, it is critical that investors, employers, and pension plan advisors have a consultative partner that can understand their objectives—both from a plan design and investment perspective.

Calls for an experienced partner

T. Rowe Price has nearly 40 years of experience helping retirement plan sponsors and plan participants prepare for retirement. For more than 20 years, we have managed asset allocation portfolios, seeking to add value through portfolio construction, risk management, and glide path design. From our first target-risk products in the early 1990s, through the introduction of our target-date strategies a decade later, to our recent expansion into multiple target-date options, our knowledge of the broader investment landscape and the behaviour of individual investors has helped to inform our firm’s philosophy and strategies. As of September 30, 2013, we manage over US$100 billion in target-date product assets on behalf of our clients.

Our approach to target-date investment strategies reflects our firm’s broader investment culture—a commitment to fundamental research and close collaboration among seasoned professionals in pursuit of investment management excellence. This process begins with the firm’s Asset Allocation Committee—a team composed of some of the firm’s most senior investment professionals that evaluates and approves all strategic and tactical asset allocation adjustments for our suite of target-date strategies. The target date port­folio management team implements the Asset Allocation Committee’s recommendations for each of the firm’s target-date strategies and is responsible for the day-to-day management, ongoing research, and oversight of these our strategies.

With innovative target-date strategies

Recognising that one size does not fit all in today’s complex investment landscape, T. Rowe
Price has developed proprietary target-date strategies designed to meet the differing needs of retirement investors and plan sponsors. Two distinct asset allocation glide paths automatically adjust their investment mix, reducing exposure to stocks and increasing exposure to bonds as the target date approaches—and continuing to adjust the mix of investments during retirement.

Our Retirement Glide Path seeks asset growth and accumulation prior to retirement, while maintaining an asset base sufficient to generate lifetime withdrawals during a retirement that could last 30 years or more. To address inflation and longevity risks, the strategy utilises a higher equity allocation than the industry average, typically around 55% at the expected retirement date. This approach may be more appropriate for investors who are willing to accept the risk of increased market volatility in exchange for the heightened growth potential that equities provide.

Our Target Glide Path promotes accumulation prior to retirement, while supporting income withdrawals over a moderate post-retirement time horizon. The strategy maintains a lower equity exposure—42.5% at the expected retirement date—in favour of fixed income investments in order to reduce the risk of principal loss around and after the target retirement date. This glide path may be more appropriate for investors who are willing to accept more modest growth potential in exchange for reduced volatility and portfolio stability around the target date.

We believe that both approaches offer important advantages:

Disciplined construction: Underlying investment portfolios are managed by experienced portfolio managers, supported by our firm’s independent global research platform of more than 200 investment analysts. Professional allocation across a broad range of stock and bond portfolios seeks an age-appropriate balance of growth potential and stability.

Flexible approach: Our Asset Allocation Committee periodically makes modest tactical adjustments to the asset allocation to reflect our assessment of prevailing economic and market conditions. The investment mix of each strategy is rebalanced regularly to help keep its long-term investment objective on course with its glide path design.

The T. Rowe Price difference

Founded in 1937, T. Rowe Price manages $647.2 billion in assets as of September 30, 2013 across a broad range of investment strategies for individuals, institutional investors, and financial intermediaries. A recognised pioneer and leader in retirement investment strategies, we employ a disciplined, risk-aware investment approach that focusses on diversification, style consistency, and in-depth fundamental research.

Global resources: Over 400 equity and fixed income investment professionals gather in-depth fundamental research, share real-time insights, and assess investment opportunities from locations around the world.

Industry experience: Over 20 years in the research, design, and management of asset allocation portfolios, adding value through portfolio construction, risk management, and glide path construction.

Seasoned professionals: Our portfolio managers average 16 years of investment experience with T. Rowe Price, and our firm’s management committee averages 23 years tenure, helping to ensure continuity in our investment approach and core values.

Thoughtful innovation: Our extensive knowledge of investor demographics, behaviour, and risk preferences allows us to address complex financial planning challenges through portfolio design and implementation.            

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