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There are many varieties of rules-based, or “smart beta,” strategies. In this article, we focus on the equity strategies1 that are currently the most commonly used among institutional investors:fundamental and low volatility.
Most participants in defined contribution (DC) plans are not on track to achieve retirement income adequacy. A key reason is that the investment lineups in most DC plans are structured in a way that reduces participants’ likelihood of implementing well-diversified and age-appropriate investment strategies.
Plan sponsors’ level of sophistication and ability to manage complexity should influence which strategies are most appropriate, and we outline several possible strategies and the governance needed to implement them successfully.