Differences among target date funds Target date funds provide a simple solution for a wide range of plan participants, but not all are created equal. Consider the following key areas and questions: Objectivity of manager selection Few target date funds are able to offer objective, independent research of a broad manager universe and ongoing assessment of the selected managers. You should consider:   Is the target date fund made up only of proprietary offerings, or is there a rigorous, proven process for researching a broad universe of money managers? What relationship exists between the manager research organization and the investment managers? Manager research and selection have been our core competency for decades. In 2006 alone, we conducted over 4,000 face-to-face research meetings with multiple managers. We use only independent managers, creating an objective process which helps you, as the plan sponsor, fulfill your fiduciary role to provide what is in the best interest of your plan participants. Asset allocation glide path The glide path, which adjusts the balance between equities, fixed income and other investments as the fund matures, can have different objectives in other industry target date funds. For example, not every target date fund explicitly aims at providing a certain level of income replacement in retirement. You should consider:   How is the glide path determined? What objective lies behind the way it is managed? Our glide path Source: Russell Investment Management & Research. Russell Glide Path as of January 3, 2008. Based on income replacement targets and downside risk parameters, we generated 20,000 scenarios to determine what mix of assets could increase the likelihood of a higher expected performance outcome within a band of risk similar to that of other industry target date funds. Based on our research, we believe that more equity investment is needed at the start to balance the risk of investors outliving their portfolio against the risk of negative events having a dramatic impact on their retirement wealth income. Ongoing fund maintenance and management Establishing a sound target date fund structure is only the first step. Maintaining a sound fund for the next 40 years and more presents just as many challenges and pitfalls. Not every target date fund has the implementation structure necessary to handle the hundreds of day-to-day details that make up the highest standard of institutional investment management. You should consider:   How well does the fund manage the ongoing implementation of the target policy? How does it handle rebalancing? What is the process for replacing an investment manager or making the other structural changes necessary from time to time? How are cash flows managed? Level of diversification and asset allocation strategy Diversification is a powerful risk-management tool for investors. Not every target date fund is able to offer fully diversified portfolios with a wide range of asset strategies and ongoing oversight and management. You should consider:   How broad is the range of investment strategies employed? How is risk style managed within each asset class? How is manager risk diversified? How are allocations determined and managed? Russell combines the individual strengths of multiple investment managers. We diversify manager risk, style and sector risk as well as other risks within a broad range of asset strategies. For more information on what we can do for you, feel free to contact James or Gerry:   West Coast   East Coast James Barrett Managing Director 866-926-5934 Gerry Lillis Director 866-459-4128 Russell Investment Group is a Washington, USA corporation, which operates through subsidiaries worldwide, including Russell Investments, and is a subsidiary of The Northwestern Mutual Life Insurance Company. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. Stock/Equity investors should carefully consider risks such as market risk when investing. There are no guarantees when it comes to individual stocks. Any stock may go bankrupt, in which case your investment may be worth nothing. Bond investors should carefully consider risks such as interest rate risk, credit risk, securities lending, repurchase and reverse repurchase transaction risk. Greater risk is inherent in portfolios that invest primarily in high yield bonds. They are subject to additional risks, such as limited liquidity and increased volatility. This is not an offer, solicitation, or recommendation to purchase any security or the services of any organization. USIRC2935			Contact us West Coast contact James Barrett Managing Director 866-926-5934 East Coast contact Gerry Lillis Director 866-459-4128   Russell research 12 Observations on Target Date Funds   Related information Our multi-manager funds Russell develops a fully objective metric to measure, compare target date fund families Target Date Metric* (TDM) - FAQs (PDF) Russell Research: Target Date Metric (PDF) Printer friendly version of this page