Updated with correction.
J.P. Morgan Asset Management uses a "to" approach to its target-date series because the company's research shows most participants in 401(k) plans move their money out within three years of retiring, said Daniel Oldroyd, New York-based portfolio manager and head of target-date strategies.
Four company studies between 2009 and 2018 showed a range of 17% to 32% of participants stayed in their plans three years after retirement.
"From our perspective, where it really matters is a certain level of risk, knowing they will likely be withdrawing" from their accounts, he said.
JPMAM wants its target-date series to reduce the risk of market shocks for people nearing retirement "without losing sight of the need to grow retirement balances," he added.
The company offers six versions, in which sponsors can choose from strategies that can include mutual funds, collective investment trusts, actively managed underlying investments, or a blend of index and actively managed underlying investments. Direct real estate is a component of the actively managed CIT-based series as well as the blend CIT-based series.
Total assets were $81.5 billion as of March 31. The biggest are the actively managed mutual fund series ($36.7 billion), launched in May 2006 and the blended collective investment trust series ($18.2 billion) launched in June 2008.
There are two glidepaths — for two options containing direct real estate and for the other four options — with the same landing point.
The original landing point was 20% equity, which was raised to 30% equity in 2007. The landing point is now 32.5% equity, and Mr. Oldroyd said JPAM can "tactically deviate from the glidepath."
JPMAM also has custom target-date arrangements with six clients with aggregate assets of $22.9 billion. Five of these series use a "to" approach. "We provide a glidepath to a sponsor, and they populate the managers," he said.
Mr. Oldroyd said JPMAM periodically conducts research to determine if changes are needed. Mostly, it has been "tweaks" such as changing the mix of underlying U.S. and foreign equity investments or the ratio of equity to fixed income along the glidepath.
"There are two key components of the glidepath," he explained. "Long-term capital markets assumptions — reviewed annually — and participant behavior — reviewed every two to three years."
Mr. Oldroyd said he has "spent less time talking about 'to' vs. 'through'" to potential clients and more about how a target-date fund fits into their objectives.
"We ask them: 'Who are you picking target-date funds for?'" he said. "What does your workforce look like? Is this a replacement for the DB plan? How many have a DB plan? Are there different salary and benefit structures across the employee base? Which one is the main target for your plan?"