![Does your DC plan have a mid-cap gap](/content/dam/invesco/us/en/images/insights/ARTCL-HRO-IMD.jpg)
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Mind the gap
DC plan sponsors and their advisors may want to reexamine their mid-cap offerings to help expand on the full potential the asset class offers.
It is no surprise that effective diversification remains one of the most useful tools plan sponsors have to help strengthen potential retirement outcomes for members. So why do so many members still remain so poorly diversified?
As of June 30, 2020, the vast majority of US defined contribution (DC) assets were invested in target date funds (30.7%) as well as traditional US equity (33%), stable value (10.2%), and US fixed income (6.9%). Less than 1% was invested in expanded “portfolio diversifier” categories, such as Treasury Inflation-Protected Securities (TIPS), real estate, and alternatives.1 That is in sharp contrast to similar retirement plans abroad, such as Australia’s arguably more developed DC system that, on average, held alternatives allocations of approximately 22% as of June 30, 2020.2
The category covers a wide range of investments, including global infrastructure, real estate, and commodities. TIPS are also frequently included in diversified real assets portfolios, given their link to inflation.
Today, DC plan sponsors can choose from a range of diversified real assets solutions to help offer members an efficient way to tap into this compelling set of diversifiers — all packaged together in one easy-to-access, professionally managed investment solution.
In this article, we dive into three compelling investment characteristics of real assets: income, diversification, and returns.
Learn more about real assets, including the three questions to ask to determine if real assets are right for your plan.
Source : Callan DC Index; data as of June 30, 2020.
APRA Superannuation Statistics, August 2020.
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The opinions expressed are those of the authors, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals.
Diversification does not guarantee a profit or eliminate the risk of loss.
These articles were prepared for US investors and may contain information that may be materially different for Canadian investors, particularly with respect to taxation matters and after-tax returns. These differences may affect suitability for Canadian investors, and these materials should not be relied upon by Canadians in making any investment decisions. This material is provided to you for informational purposes only and may not be distributed or shared with others.
The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. All figures in USD unless otherwise stated.
For more information on any of the topics discussed, please contact your Invesco Representative.
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