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Due diligence considerations when selecting a target date investment strategy

Given the nature of their design, target date investments warrant a comprehensive evaluation approach.

By: Chris Luongo Lance McInerney Sarah O’Toole
Updated: 4/19/2023
Key Takeaways
  • We believe that multiple criteria should be considered when evaluating target date providers, in seeking to identify an investment strategy that may lead to successful outcomes for participants.
  • A target date investment strategy should align with a plan’s goal and the behaviors and needs of its participants, both now and in the future.
  • It is important to evaluate a target date provider’s philosophy, process, and people; the investment strategy should have a well-defined research approach that accounts for the manager’s beliefs and insights about the capital markets.
  • With a solid understanding of a target date provider’s investment process, including how the strategy seeks to manage risk, the performance and cost of the investment strategy can be evaluated in proper context to determine value.
  • The target date investor’s overall experience should also be evaluated, including assessment of a strategy’s participant communication and engagement program.
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