Each fund invests across a range of asset classes and uses a blend of active and passive management. About 50% of the overall total fund exposure is passively or quantitatively managed. The portion that is actively managed is invested with a mix of third-party advisers selected by Russell’s manager research process, and in areas where Russell’s capital markets insights indicate that there is the highest potential for active manager outperformance, including specialty equities, listed infrastructure, commodities and global real estate.
“This redesign represents a balance between cost effectiveness for participants and the thoughtful use of active management to enhance potential returns,” said Josh Cohen, defined contribution practice leader. “Instead of trying to choose between active and passive, we believe that plan sponsors should look to intelligently combine active and passive managers in their target-date funds. By investing entirely passively, sponsors will miss opportunities because certain asset classes do not lend themselves to indexing.”