401(k) Specialist Issue 1 - 2016 - 23

TARGET DATE FUNDS
PNC Capital Advisors
MARK MCGLONE GETS RIGHT TO IT.
" We came at the target date fund approach differently, " says the
president and chief investment officer of PNC Capital Advisor.
" We tried to model in a way that said, 'you're young and have
30 to 40 years to save for retirement. We want to minimize the
possibility you will come out of your working life with a negative
real return.' "
Well, yes it may sound obvious, but then why do so many money
managers mess it up? PNC's not one, and McGlone attributes
the following four factors to its success.
* Their asset allocation model arrived at a glide path that reduces
equity and increases not only fixed income, but also cash
and TIPS.
* Open architecture - PNC utilizes internal and external
mutual funds and ETFS. " We don't have all the capabilities
internally, so we use external sources, " says McGlone.
* The firm uses a combination of active and passive managers,
and makes sure that active managers " are indeed adding alpha. "
* " We have solid performance in our proprietary funds, which
are a majority of the portfolio, " he says.
" People have learned lessons about target date funds, " McGlone
concludes. " They're products with long time horizons, and we haven't
seen much movement in and out with recent volatility. They
realize these funds are designed to give them retirement funds
when they need it most. "
John Hancock Investments
AHEAD OF THE CURVE; it's how they roll, whether it's in target
date education (before it was required by the Department of
Labor), their multimanager approach or their experience in constructing
glide paths.
" Our performance is a reflection of the way we approach
building our funds, " says Nathan Thooft, co-head, senior managing
director and senior portfolio manager, global asset allocation,
portfolio solutions group with John Hancock Investments (we
envy the title). " Our process in constructing asset allocation models
goes back to the 1990s. It is a multimanager, multi-asset class
approach, which provides a lot of tools to create well-constructed
portfolios and strategies. "
Thooft notes it allows them to stay abreast and ahead of regulation.
" The
DOL says that managers should consider non-proprietary
strategies, and our multimanager structure therefore solves for it.
There are also concerns about the rising interest rate environment
after 30 years in a declining rate environment. We have products
and strategies in place to address this. So between the longevity
of our team in constructing asset allocation models, our multimanager
process and our multi-asset class approach, we've got it
covered. "
As for what's next, Thooft is " of course " seeing more of a focus
on fiduciary issues. Fees, in particular, are receiving a large amount
of attention and John Hancock made a concerted effort to lower
fees in the past year, " so we're ahead there as well. "
" Lastly, the macro-environment is an issue for us, and we're very
proactive in seeking out new sectors to assist with better risk-adjusted
returns. The development of liquid alternative investments
have made it easier to offer better protection against downside
risk, and it's something we include in our strategies. In that vein,
we're constantly looking to implement new asset classes with
diversifying benefits in a cost-effective manner. "
Mark McClone
President and Chief
Investment Officer
Nathan Thooft
Co-Head, Senior Managing Director
and Senior Portfolio Manager
| John Hancock Investments
| TIAA-CREF | T. Rowe Price | Principal
| Fidelity investments | MFS Investments
ISSUE 1 2016 | 401kSpecialistmag.com 23
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401(k) Specialist Issue 1 - 2016

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