S&P Adds ‘To’ & ‘Through’ to Target Date Indices

The S&P Target Date Style Index Series comprises a set of multi-asset class indices, each corresponding to a different target retirement date. Each index is fully investable, with varying levels of exposure to the asset classes determined during an annual survey process. These new indices classify funds, according to their asset allocation and glide paths, into two sub-groups.  

• “To” funds have relatively conservative glide paths and aim to emphasize market risk sensitivity around the retirement date; while  
• “Through” funds are relatively more aggressive and aim to be more sensitive to longevity risk at, and beyond, the retirement date. 

For defined contribution plans that wish to incorporate more sensitivity to market risk, sponsors may screen for target date funds pursuing a “to” style, and evaluate those funds relative to an S&P Target Date To Index.  Conversely, sponsors may screen for target date funds pursuing a “through” style if it is more appropriate for their plans to be more sensitive to longevity risk, and can compare such funds to an S&P Target Date Through Index. 

“As defined contribution plans become increasingly important, we are excited to augment our S&P Target Date Indices lineup to help sponsors take into account both market and longevity risk sensitivity to their fund evaluation process,” said Craig Lazzara, senior director at S&P Dow Jones Indices.

Besides acting as benchmarks, each index is fully investable, S&P said, with varying levels of exposure to asset classes determined during an annual survey process. The current universe of eligible asset classes include: U.S. large cap, U.S. mid cap, U.S. small cap, international equities, emerging markets, U.S. real estate investment trusts, core fixed income, cash equivalents, Treasury inflation-protected securities, and high-yield corporate bonds. Each of the funds invests in these categories through exchange-traded funds (ETFs.)

Lee Barney