Target-Date Fund Construction

Grant Gardner* and Yuan-An Fan**

Russell Investment Group

07 December 2006, 4:00 P.M., Mary Gates Hall 238

Target-date funds are designed to provide simple investment solutions for participants in defined contribution savings plans and others who contribute regularly to retirement savings plans. We will outline Russell Investment Group's methodology for designing target date funds. Our focus will be on the equity/bond "glide path" over the working life of the investor. This glide path is the solution of a stochastic multiperiod optimization problem.

A background paper (in PDF format) is available here. The slide set from this talk is available upon request; e-mail Dan Osborn (dwosborn@u).



*Dr. Gardner is senior balanced funds strategist for Russell Investment Group. Grant works with the balanced fund portfolio managers in setting asset allocation, making fund selection, and designing new balanced fund products. Previously, he was Russell's director of capital markets research. In this role, he planned and coordinated Russell's research in the areas of manager behavior, fund structure and financial economics.

**Dr. Fan is a senior research analyst with Russell Investment Group’s U.S. institutional research and strategy group. Currently, Yuan-An is working on projects to improve Russell's investment technology, especially in the area of portfolio rebalancing and retirement income. He also performs asset/liability studies for Russell's U.S. consulting and trust company clients and asset allocation and spending studies for endowments and foundations. Yuan-An joined Russell's research group in 1992 as a member of the business engineering team.

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