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A Closer Look at American Funds Target Date Retirement Series®
Portfolio managers Jim Lovelace, Wesley Phoa and Brad Vogt discuss the American Funds Target Date Retirement Series. The three managers are part of the Portfolio Oversight Committee in charge of the series. They discuss how the series strives to balance longevity risk (outliving assets) and market risk (volatility) through the use of dividend-paying stocks. In addition, they share their approach to strategic and tactical asset allocation and describe the importance of aligning the glide path to participant objectives.
Balancing Longevity and Market Risk
Portfolio managers Jim Lovelace, Wesley Phoa and Brad Vogt discuss the importance of having meaningful equity exposure at retirement to help reduce longevity risk, or the risk of outliving one’s assets. However, investors also need to carefully manage market risk. The series seeks to do this by emphasizing historically less-volatile dividend-paying equities near retirement. This approach is facilitated by American Funds’ long history of managing to investor objectives like appreciation, income and preservation.
Balancing Risks
Portfolio manager Jim Lovelace describes the series’ approach to equity and fixed income.
A Strong Track Record
Portfolio manager Brad Vogt shares reasons for the series’ success so far.
A Deeper Look at Asset Allocation
Portfolio managers explain why different types of equities and bonds are used in different stages of the savings cycle. Active management has been key to the series’ dividend-oriented approach to managing volatility near retirement; through fundamental research, managers seek to identify companies that are likely to continue to pay or to grow their dividends. Bonds provide a mix of diversification, yield and capital preservation.
Glide Path Within a Glide Path
Portfolio manager Jim Lovelace describes the equity “glide path within the glide path,” which emphasizes less-volatile dividend stocks near retirement.
The Role of Fixed Income
Portfolio manager Wesley Phoa describes how bonds and equities work together in the series.
Rigorous Analysis and Oversight
Portfolio managers explain how the target date series is designed to work in multiple market and economic environments. They also review some of the analytical tools that managers use to assess how well the glide path is working for participants. Managers also describe the use of flexible underlying funds for tactical asset allocation.
The Role of the Oversight Committee
Portfolio manager Jim Lovelace explains the role of the Portfolio Oversight Committee in managing the series.
An Adaptable
Approach
Portfolio manager Brad Vogt explains how the long history of the underlying American Funds allowed managers to test the glide path in a variety of market environments.
Evaluating the
Glide Path
Portfolio manager Wesley Phoa describes the analytical tools managers use to assess whether the glide path is meeting participants’ needs.
The Importance of Flexible Funds
Portfolio manager Jim Lovelace explains why managers use global and multi-asset underlying funds for tactical allocation.
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- Read More Insights From Target Date Managers (PDF)
In this companion Q&A, managers further explain their approach to the glide path.
- Read More Insights From Target Date Managers (PDF)
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing. Similar information about collective investment trusts can be obtained from Capital Group or participants’ plan provider or employer.
Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group, which receives fees for managing, distributing and/or servicing its investments.