Washington, D.C. counsel Brad Campbell was quoted in an article in Plan Adviser titled, “Reducing Volatility in DC Plan Lineups.”
Brad discussed how a number of investment companies and investment advisors are turning to new products to reduce volatility in participant accounts in the wake of the 2008 financial crisis. He explained that some advisors and plans feel the typical long-term investment strategies and products may not sufficiently guard against short-term volatility or, alternatively, may significantly limit potential for investment gains. Brad partnered recently with investment services provider F-Squared Investments to author a whitepaper on the subject of addressing volatility in DC plan fund lineups. One important theme addressed in the paper is the fiduciary considerations of selecting and monitoring downside-risk products in ERISA plans. The white paper discusses relevant factors for fiduciaries to consider as part of their prudent investment selection process, as well as specific issues related to using such a product as a Qualified Defualt Investment Alternative (QDIA).
Near-retirees have less time to recover from dramatic downturn events, Brad explained, but as average lifespans lengthen and the cost of medical care and other necessities increases, there is also a pressing need for continued equity exposure to help workers' assets last through retirement.
“The traditional way of thinking about retirement investing is that it's long-term investing, and you look to your horizon and if things go up or down in the middle, well that's why you're taking the long view. But as we saw in 2008, we can have some unexpected and significant shakeups that have some really harmful effects on the participants that are nearing retirement and those who have less time to recover,” Brad said.