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Custom Target Date Builder couples innovative, easy-to-use technology with the capabilities of two of the world’s investment leaders, BNY Mellon Investment Management and Wilshire Associates Incorporated.
Retirement Plan Professionals (RPPs) can model custom target date portfolios for plan sponsor clients using a defined contribution plan’s investment option line-up. Custom Target Date Builder features include:
Note: In the event that a plan client wishes to proceed with engaging a fiduciary provider of custom target date services, the RPP may arrange for a separate discussion with Wilshire, whose services are provided within an “ERISA 3(38)” fiduciary framework to mitigate fiduciary risk.
With the sound foundation offered by Custom Target Date Builder, RPPs can pull three key levers to create bespoke illustrations of custom target date portfolios that are built on an individual plan client’s risk preferences and investment menu.
An RPP can calibrate the mix of equity and fixed income exposure in the tool’s portfolio models, offering a choice of five investment risk levels including:
• Moderate Conservative
• Moderate Aggressive
Within each investment risk level, the glide path is slowly de-risked as the participant approaches retirement and through his or her retirement years until the glide path’s most conservative allocation or landing point is reached. The Aggressive through Conservative glide path options are structured to accommodate a participant’s general preference and capacity for risk.
This ability to adjust the risk level up or down in the context of specific retirement target dates, such as 2050, creates a custom target date portfolio that combines the best of the target date and target risk approaches.
Figure 1: Five glidepath options, with Wilshire research baked in to each one
The S&P Target Date Index Series comprise multi-asset-class indices, each corresponding to a particular target retirement date. Each index provides varying levels of exposure to equities and fixed income, and each target date allocation is created and retired according to a pre-determined schedule related to the respective target date. The S&P Target Date Style indices are designed to help defined contribution plan sponsors screen, select, and monitor appropriate target date funds, and help determine where particular target date fund families fall on the "to"/"through" spectrum.
Many off-the-shelf, one-size-fits-all target date funds in use today have limited asset class diversity, which may reduce the potential for long-term returns and risk mitigation benefits of broader asset class exposure.
Powered by Wilshire Associates , Custom Target Date Builder allows RPPs to evaluate investment strategies across as many as 18 asset classes, from which sophisticated, broadly diversified portfolios can be crafted. The available asset classes are shown in Step 3:
Conventional target date funds typically invest in proprietary funds managed by a single fund family, depriving plan sponsors of the benefits of open architecture sought after in today’s institutional line-ups. Custom target date solutions, on the other hand, reflect the diversity of the plan’s existing investment options as well as any new funds that may be added to the fund line-up.
Custom Target Date Builder models portfolios using hundreds of strategies across asset classes that have passed Wilshire’s rigorous investment manager due diligence screening. These investment choices include actively and passively managed strategies from a universe of mutual funds and collective investment funds. 1
Figure 2: Available asset classes include:
BNY Mellon Investment Management is one of the world’s leading investment management organizations and one of the top U.S. wealth managers, encompassing BNY Mellon’s affiliated investment management firms, wealth management organization and global distribution companies. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation and may also be used as a generic term to reference the Corporation as a whole or its various subsidiaries generally. BNY Mellon Securities Corporation is the distributor for the BNY Mellon Family of Funds and is a subsidiary of BNY Mellon.
Wilshire is a diversified global financial services firm that serves in excess of 500 clients across 20 countries an independent firm for over 40 years, is supported by a global network of offices in the U.S., Europe, and the Asia Pacific. Today, Wilshire remains a privately held, 100% employee-owned corporation. Since its founding in 1972, Wilshire has evolved from an investment technology firm into a global advisory company specializing in investment products, consulting services, and technology solutions. Throughout its history, Wilshire has retained a position of leadership in providing innovative ideas to the investment community.
In October 2020, Wilshire announced it has entered into a strategic partnership with CC Capital and Motive Partners, whereby the two firms would acquire a controlling interest in Wilshire. The transaction closed on January 8, 2020.
A MODELING TOOL FOR RETIREMENT ARCHITECTS
Important Information for BNY Mellon Custom Target Date BuilderSM
General. The Custom Target Date Builder is designed to help financial professionals assess how custom target date portfolio models may be built for their defined contribution plan clients. Unlike a target date fund product that invests in a fixed set of funds that do not vary by plan, a custom target date portfolio model uses the actual fund options included in a plan’s particular investment menu. This online tool may be used to create hypothetical custom target date models that are comprised of portfolio allocations for plan participants with different target retirement ages based on a proposed plan menu that you select for the plan. The proposed fund menu must meet certain asset class requirements, and at least two BNY Mellon fund options must be included. You will also be asked to choose from 5 different levels of risk for the model’s glidepath.
Powered by Wilshire. Based on this information, hypothetical custom target date portfolio models will be generated using the glidepath methodology of Wilshire Associates Incorporated (“Wilshire”). The Custom Target Date Builder is distributed by BNY Mellon Securities Corporation (“BNY Mellon”), a registered broker-dealer and a BNY Mellon Investment Management firm. Wilshire has been engaged by BNY Mellon to develop this online tool on its behalf. The Custom Target Date Builder does not provide investment advice, and BNY Mellon and Wilshire are not acting as fiduciaries under this online program. For purposes of determining the proposed fund menu, financial professionals may choose from the plan’s existing fund options or any other option from a universe of available funds. However, only those funds that have been pre-screened by Wilshire will be selected for asset allocation in its models. Additionally, fund options from Wilshire’s list of preferred funds that have passed its investment manager due diligence screens (the “Focus List”) generally will also be selected for asset allocation. The mere fact that a fund has been placed on Wilshire’s Focus List, or is otherwise selected for asset allocation under its models, should not serve as the primary basis for any plan investment decisions. Any fund (including its share class) that is available for selection for the proposed fund menu may or may not be accessible through the plan’s existing recordkeeping platform.
Educational Purpose. The hypothetical portfolio models that are generated by the Custom Target Date Builder, including any Focus List funds or any other funds for Wilshire’s models, are intended to be educational, and they are not tailored to the investment needs of any specific plan or plan investor. The funds or proposed funds that are included in the portfolio models represent just one way that a diversified portfolio may be constructed and not the only way to construct a diversified portfolio. Accordingly, the portfolio models including any funds selected for asset allocation should not serve as the primary basis for any plan investment decisions, and the portfolio models generated by this online tool should not be shared with plan participants. The provision of this hypothetical portfolio model information including any funds identified from the Focus List do not obligate Wilshire or BNY Mellon to provide any such information on a regular basis.
Portfolio Model Providers. The plan client/fiduciary does not have an agreement with Wilshire (unless they have engaged Wilshire to provide the “3(38) Investment Manager” Services for Model Portfolios). Plan fiduciaries should carefully research any potential fund or portfolio model before making an investment decision, and other funds or portfolio models with similar risk and return characteristics may be available. If a plan client wishes to implement any custom target date portfolios, Wilshire or another 3(38) portfolio model provider should be hired by the plan client. Unlike Wilshire, other 3(38) providers may be unable to implement custom portfolios unless they are also hired to select the plan menu. BNY Mellon’s Custom Target Date Builder does not provide fiduciary advice with respect to the construction of portfolio models, or the selection of 3(38) portfolio model providers for plans.
Investors should consider the investment objectives, risks, charges, and expenses of a mutual fund carefully before investing. Investors should contact a financial professional or visit im.bnymellon.com to obtain a prospectus, or summary prospectus, if available, that contains this and other information about the fund, and read it carefully before investing.
All investments involve some level of risk, including loss of principal. Certain investments have specific or unique risks.
An investment in a target date strategy does not eliminate the need for an investor to determine whether a strategy is appropriate for their specific financial situation. An investment in a strategy is not guaranteed. Investors may experience losses, including losses near, at, or after the target date, and there is no guarantee that a strategy will provide adequate income at and through retirement.
1 Bank-maintained collective investment funds and their units are not registered under federal and state securities laws in reliance upon applicable exemptions. Because these funds are not mutual funds, they are governed by different regulations, restrictions and disclosure requirements. For example, these funds are subject to banking and tax regulations which, among other things, limit participation to certain eligible qualified retirement plans (stock bonus, retirement, pension and profit sharing accounts) and governmental plans.
The tool will require a minimum of two BNY Mellon Investment Management investment options be included among up to 18 strategy allocations in the target date portfolio.
The use of the tool is subject to Wilshire’s User Agreement.
BNY Mellon and Wilshire Associates are not affiliated entities.