Defining and Selecting Strategic Asset Exposures for Target Date Investors

February 2022

An effective target date strategy provides diversification, reflect members’ long-term investment horizons, and employs a disciplined process to establish the strategic asset allocation.

Highlights

Strategic asset allocation is the primary driver of a target date fund’s performance over time, and diversification is one of the most powerful tools for helping retirement investors navigate the uncertainty of capital markets.
The Fidelity Target Date team’s strategic allocation process for target date funds emphasizes assets that earn a long-term return, display independent attributes in different investment environments, and offer durable implementation characteristics.
Our proprietary research provides insight into how asset classes behave during each of five distinct market regimes and in response to a common set of risk factors, highlighting those assets that offer unique sources of diversification.
Rising concerns over higher global debt and lower GDP growth reinforce the need for a strategic asset allocation diversified across market regimes rather than concentrated in a limited set of risk factors.

Clustering analysis reveals historical relationships among asset classes

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CDN: Canadian. DM: developed markets. Hgd: hedged. Sov: Sovereign. Commod: commodity. Hierarchical clustering of asset classes based on historical average correlation (1950–2019). The height of each vertical line indicates the strength of the relationship between asset groups. Source: Fidelity Investments, as of 12/31/20

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Authors

Andrew Dierdorf

Portfolio co-manager

Andrew Dierdorf is a portfolio manager in the Global Asset Allocation group at Fidelity Investments. In this role, he is responsible for co-managing Fidelity’s U.S. and Canadian target date portfolios.

Before joining Fidelity in 2004, Andrew worked as an actuary at CIGNA and held actuarial roles at Provident Mutual Life Insurance Company. He has been in the financial services industry since 1993.

Brett Sumsion

Portfolio co-manager

Brett Sumsion is a portfolio manager in the Global Asset Allocation group at Fidelity Investments. In this role, he is responsible for co-managing Fidelity’s U.S. and Canadian target date portfolios.

Before joining Fidelity in 2014, Mr. Sumsion held various positions at DuPont Capital Management, Inc., including that of managing director of asset allocation and portfolio manager. Previously, Mr. Sumsion worked at Strategis Financial Group, Inc., where he was chief executive officer and vice-president of asset allocation research. He has been in the investments industry since 2001.

Bruno Weinberg Crocco

Portfolio co-manager

Bruno Weinberg Crocco is a portfolio manager in the Global Asset Allocation (GAA) group at Fidelity Investments. In this role, Mr. Crocco co-manages Fidelity Canada’s ClearPath retirement portfolios.

Prior to assuming his current position in February 2019, Mr. Crocco was responsible for providing research support to the portfolio managers of Global Institutional Solutions (GIS) and U.S. and Canada Retail Solutions Groups. Additionally, Mr. Crocco was responsible for researching active asset allocation investment signals and disseminating his findings across GAA. Previously, Mr. Crocco was a manager in the Financial Markets Group where he was responsible for monitoring global financial markets for trends and risks that might impact Fidelity’s mutual funds and businesses.

He has been in the investments industry since joining Fidelity in 2010.

Finola McGuire Foley

Portfolio Manager, Global Asset Allocation

Finola Foley is a portfolio manager for Fidelity Investments. Ms. Foley currently co-manages Fidelity’s Freedom Index funds and FIAM Index Target Date portfolios, as well as the Fidelity Four-in-One Index Fund. She joined Fidelity in 2003.

Ruthann Pritchard

Institutional Portfolio Manager

Ruthann Pritchard is an institutional portfolio manager in the Global Asset Allocation group at Fidelity Investments. In this role, she serves as a member of the investment management team and is also a principal liaison for portfolio management to a broad range of current and prospective clients. Ms. Pritchard’s focus is on target date strategies.

Ms. Pritchard joined Fidelity in 2006 as Vice-President, Investment Consultant, in Personal Workplace Investments (PWI). Before joining Fidelity, she was vice-president at JPMorgan Asset Management and JPMorgan Retirement Plan Services. She has been in the investment industry since 1984.

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