I’m more concerned with the return of my money than the return on my money.
—Mark Twain
Part One of this book provided a DC design framework along with suggestions for governance, investment structure, and target-date strategies. In Part Two, we will consider how to fill the core investment lineup with a chapter dedicated to each of the four core risk pillars: capital preservation, fixed income, equity, and inflation hedging (as shown in Figure 5.1). Plus, we provide a chapter on additional strategies such as global balanced and alternatives. In each chapter, we’ll consider a range of strategies, share insights from plan sponsors, consultants, and other experts, then offer an analytical framework to evaluate potential investment choices. We start off with a look at capital preservation choices, including money market funds (MMFs), stable value, and short-term bond alternatives.
FIGURE 5.1 The Four Pillars of Well-Balanced Core Lineups
Source: PIMCO.
CAPITAL PRESERVATION: IMPORTANCE
The aphorism by Mark Twain that opens this chapter presents a common sentiment, one that explains why capital preservation strategies, long a cornerstone in DC plans, are also among its most popular offerings. As the name implies, these strategies are meant to allow participants to prioritize the preservation of invested principal; return may be of ...
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