Risk-Managed Portfolios rather than Target Date Funds may offer

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Risk-Managed Portfolios rather than Target Date Funds may offer investors
better protection from effects of severe market decline – F-Squared
F-Squared Investments Publishes Paper on New Perspectives on Risk Managed Portfolios
Wellesley, MA. – May 14, 2015 – “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 FSquared 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
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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.
www.f-squaredinvestments.com
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