Risk-Managed Portfolios Rather Than Target Date Funds May Offer Investors Better Protection From Effects of Severe Market Decline – F-Squared

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F-Squared Investments Publishes Paper on New Perspectives on Risk Managed Portfolios

“Faced with a potential repeat of the damaging effects to their retirement savings of a major market decline, such as the one in 2008/09, investors should consider risk-managed portfolios as a better investment option compared with the more traditional and widely popular target date funds,” said Brendan McCarthy, Senior Vice President, Retirement Solutions at F-Squared Investments.

Mr. McCarthy was commenting following publication of an F-Squared paper on “Redefining Retirement: Potential Advantages of Risk-Managed Portfolios vs. Target Date Funds” which discusses how target date funds may be ill-equipped to meet the needs of plan participants, thus jeopardizing the ability of these participants to achieve their retirement goals.

Although target date funds typically meet the needs of plan sponsors and advisors, they may fail to provide protection for their participants from the damaging effects of a market decline such as the one in 2008 – 2009. Risk-managed portfolios, however, are designed to weather periods of elevated volatility where the risk of loss is greater.

The F-Squared paper explains how plan fiduciaries can incorporate risk-managed strategies into their menu of investment options in order to better meet the needs of their participants. It also discusses how F-Squared uses tactical management to adjust portfolio risk as volatility increases or decreases in an effort to avoid large losses.

“Increasingly, plan sponsors are being drawn to a relatively new category of risk-managed portfolio strategies that seek to address some of the drawbacks of target date funds. In these approaches, managers dynamically adjust portfolio allocations to reflect the current market environment in such a way as to limit the risk of large losses,” said Mr. McCarthy.

“We believe that plan sponsors, who are responsible for assembling risk-appropriate investment menus, should offer strategies that accurately identify and adapt to changing levels of risk — especially near those inflection points when markets move from normal to high-volatility environments. Such strategies are designed to help investors avoid the fallout from severe market downturns. At F-squared, our investment process is designed to provide the flexibility to move into cash alternatives in dangerous markets to avoid severe downturns or to simply reallocate among healthier segments as well. Both of these options can be very important to an investor’s retirement savings strategy.”

The F-Squared paper discusses what risk-managed portfolios are, how they are designed to avoid significant market losses, and why a plan sponsor may consider adding them to their investment menu. The paper aims to provide a new perspective on how plan fiduciaries can evolve their investment offerings to satisfy their participants’ need to protect their retirement assets from potential losses while participating in healthy markets.

A copy of the paper, as well as additional information on F-Squared’s retirement plans and professionals, may be viewed here: http://f-squaredinvestments.com/markets/retirement-plans/.

A related video built for investors from F-Squared highlights how our approach helps investors save for retirement and may be viewed https://www.youtube.com/watch?v=rVTumdv_HBA.

About F-Squared Investments

F-Squared Investments is an asset manager that provides next-generation investment indexes and strategies based on its AlphaSector® and Portfolio Replication Technology capabilities. The firm seeks to provide an investment approach that repeatedly protects clients in down markets and helps them participate as much as possible in up markets. F-Squared focuses on delivering powerful and innovative investment solutions to help meet investors’ expectations and financial goals. The firm serves clients in the advisor, institutional, retail and retirement markets. F-Squared Investments is based in Wellesley, MA, and Ewing, NJ. As of March 31, 2015, F-Squared affiliated entities had over $16 Billion in fee-generating assets.


Important Information

Past performance is not indicative of future results.

“AlphaSector®” is a registered trademark of F-Squared Investments, Inc. and is used with permission. F-Squared reserves the right at any time and without notice to change, amend, or cease publication of the information contained herein. This material has been prepared solely for informative purposes.

The views and statements expressed in the referenced materials are subject to change based on market and other conditions. These statements may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur. The information provided herein does not constitute investment advice and is not a solicitation to buy or sell securities.

Risk Disclosures

No investment strategy or risk management technique can guarantee returns or eliminate risk in any market environment. Risk Management, Asset Allocation, nor Diversification, does not guarantee a profit or protection against loss. All investments include a risk of loss that clients should be prepared to bear. The principal risks of the AlphaSector Strategies are disclosed in the publicly available Form ADV Part 2A.

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