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Defined contribution plans

Wellington Management has a long heritage of managing retirement assets. We understand that today’s defined contribution (DC) plan sponsor requires advanced thinking and holistic solutions from its asset manager to help build the best plan for its participants.

Our clients turn to us for:

  • Institutional best practices, including asset allocation strategies designed to potentially help provide a better investment experience for participants
  • A broad spectrum of investments that spans core and noncore asset classes, and vehicle flexibility to help position their plans and employees for success
  • A collaborative and customized approach to problem solving that serves the varied needs of the DC market

Our philosophy

Research shows that historically there has been a meaningful shortfall in the returns of defined contribution plans versus those of defined benefit plans. We believe best practices in institutional investing can potentially help close this gap and improve outcomes for plan participants. Central to our investment philosophy is the belief that diversification, inflation and downside consideration, and active management can be key drivers of retirement success.

Diversification Whether using premixed investment options or constructing portfolios from a core menu, participants may be better served by having access to a broader set of asset classes, including global equities, global bonds, and “equity alternatives” such as high-yield bonds and emerging market debt.

Inflation hedging Inflation may be the greatest risk plan participants face, yet their investment portfolios are typically not prepared to defend against it. To help participants better protect their nest eggs, we believe they should have a meaningful allocation to inflation-sensitive assets.

Downside consideration To help enhance returns and provide participants with a potentially smoother ride, attention to downside risk is extremely important. We believe it is important to consider strategies that help diversify a portfolio by economic environment, asset class, and return source, including strategies with the potential to perform independently of the market.

Active management Even modest incremental returns may have a meaningful impact on retirement outcomes, and we believe the opportunity to improve participants’ investment results through active management is meaningful. In plans that use both active and passive investments, we believe actively managed options that focus on less-efficient markets may serve participants best.

Read more about the key challenges facing DC plan sponsors.

DC research

Our goal is to be a thought partner to DC plan sponsors as they navigate the ever-changing DC landscape, and to work with them to deliver solutions that position participants for a successful retirement. Following are some of our recent research insights on plan design and investing best practices.

Structuring multi-manager investments While multi-manager investments can involve some operational complexities, those complexities may be far outweighed by the benefits, including simplified but more diversified investment options and greater control over costs and manager changes. In structuring these investments, we advocate a framework designed to move beyond simple return-based or style-box classification to a risk-factor approach that we believe can provide participants the potential for a more consistent return profile with downside consideration over time. Read more about our multi-manager framework.

Preparing retirement portfolios for lower bond returns Historically, bonds have contributed to a balanced portfolio’s ability to pursue a compelling long-run real return. In addition, high-quality fixed income assets, including nominal government bonds and inflation-linked bonds, have played an important role in portfolios during periods of weak growth (lower half of chart). However, we believe it is unlikely that bonds will outperform CPI over the next three to five years, which creates a challenge for plan participants. As a result, we think target-date portfolios should revisit their core fixed income holdings, taking steps to pursue attractive returns while maintaining bonds’ diversification benefits. Read more about target-date best practices.

Bonds have stood out in weak growth environments

For illustrative purposes only, based on historical analysis. Future performance may vary significantly.

Client solutions

We offer a comprehensive selection of core investment approaches. For specific plan needs, we also provide a wide range of multistrategy and noncore investments.

We collaborate with our plan-sponsor clients to fully understand their particular plan objectives by asking the right questions before we recommend an investment solution.

Collective Investment Trusts

Wellington Trust Company, NA, an affiliate of Wellington Management Company LLP, offers a variety of investment approaches through daily valued collective investment trusts that are available solely to certain qualified employee retirement plans.

Equity

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Fixed Income

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Multi-Strategy

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Important Risk Information
There is no guarantee the Portfolio's investment strategy will be successful. Investing involves risk, and an investment in the approach could lose money.

Diversification cannot assure a profit or protect against loss.

FROM KNOWLEDGEBANK

 

Dec 2016 | Portfolio policy

The case for global equities: Diversifying risk in a volatile world

Authors: Nick Petrucelli, CFA, ...

While the typical US defined-contribution pension plan portfolio has a structural bias toward US equities, we consider a 50% weighting to non-US equities to be a more efficient allocation. Further... Read more

 
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Dec 2016 | Opportunities and risks | Sign in

Opportunistic Inflation Sensitive Bond: A new approach to hedging inflation risk

Authors: Brij Khurana, ...

The authors outline a strategy that aims to hedge inflation risk more effectively and deliver higher total returns than traditional inflation-linked bonds (ILBs) in inflationary regimes, with... Read more

 
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Nov 2016 | Opportunities and risks | Sign in

Short duration bonds: Worth a look by defined contribution plans

Authors: Jed Petty, CFA, ...

With limited interest-rate risk and a focus on high-quality, liquid investments, short duration bond funds may be suitable as a capital-preservation menu option for DC plans. Although the NAVs of... Read more

 
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Feb 2016 | Opportunities and risks | Sign in

Diversified research strategies: An active equity approach for DC plans

Authors: Jed Petty, CFA, ...

With a goal of delivering attractive risk-adjusted returns over time, our Research Equity strategies can help plan sponsors meet fiduciary duties and offer participants exposure to institutional... Read more

 
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Jun 2015 | Portfolio policy | Sign in

From supplementary savings to primary plan: Rethinking the defined contribution model

Authors: Jed Petty, CFA, ...

Our director of DC strategies offers a path for improving participant outcomes, including best practices in four key areas of plan design. Read more

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Jun 2015 | Portfolio policy | Sign in

Bonds without borders or benchmarks: Expanding fixed income options in a DC plan

Authors: Kristin O'Donnell, CFA, ...

Plan participants’ risk and return objectives would be better served if the core DC menu included fixed income strategies that tap a global set of return sources. Read more