According to a press release, the Dow Jones Real Return Target Date Indexes are designed to serve as benchmarks for lifecycle portfolios that start out aggressively to grow assets and end with a conservative mix of investments based on the portfolio’s “target date.” The indexes also can serve as the basis for financial products.
“With the proliferation of target date strategies and investment products in recent years, we believe that benchmark selection is an important step in launching our own target date funds. We chose the Dow Jones Real Return Target Date Indexes because they provide an objective, well-constructed and appropriate representation of a diversified mix of assets that are suited for DC plan participants. The indexes’ focus on inflation protection and use of real assets also were key criteria in our decision. Dow Jones Indexes has truly been exceptional in taking target date indexes to the next level,’ said Bob Greer, Real Return Product Manager of PIMCO. The just-launched PIMCO RealRetirement suite is only the latest of a series of target-date offerings that have either come to market, or been expanded in recent months (see PIMCO Launches Target-Date Suite).
Launched last month (see Dow Jones Introduces Benchmarks for Lifecycle Funds), the Dow Jones Real Return Target Date Indexes comprise 11 indexes, nine with target dates in 5-year intervals out to 2045, plus a Dow Jones Real Return 40+ Index and Dow Jones Real Return Today Index. Each index in the series represents a mix of sub-indexes representing stocks and bonds, Treasury Inflation Protected Securities (TIPS)—guaranteed by the U.S. government to pay interest above the rate of inflation—as well as commodities and real estate, which potentially counterbalance inflation.
The sub-indexes are the:
- Dow Jones Wilshire Global Total Market Index,
- Lehman Aggregate Bond Index,
- Lehman U.S. TIPS Index,
- Dow Jones-AIG Commodity Index and
- Dow Jones Wilshire Real Estate Securities Index.
According to Dow Jones Indexes, the component asset classes are weighted within each Dow Jones Real Return Target Date Index to measure a targeted level of risk. Stocks and bonds are classified as nominal assets with high- and low-risk profiles, respectively. Real estate securities and commodities are considered real assets with high-risk profiles, and U.S. TIPS are considered real assets with a low-risk profile.