Capital Group reviews target‑date suite; board approves American Funds 2065 and 2070 for DC lineup
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Summary
Capital Group presented performance and design details for its target‑date funds; the Pension Board voted to add American Funds 2065 and 2070 vintages to the defined‑contribution lineup and reviewed participant-use metrics and recordkeeper relationships.
Capital Group representatives reviewed the firm’s target‑date strategy and performance and answered board questions on glide‑path design, risk management, and participant behavior. After the presentation, the board voted to include two additional American Funds target‑date vintages — 2065 and 2070 — in the city’s defined‑contribution menu.
Bridal McCloskey, a Capital Group relationship manager, introduced Jeff Bent (multi‑asset investment director) and described the firm’s target‑date approach. Capital Group told the board the target‑date suite ranked in the top deciles for multi‑year periods (Capital Group cited average percentile ranks in the low teens for one year and top decile for five‑ and ten‑year periods) and attributed performance to a mix of security selection, strategic allocation and tactical flexibility. Capital Group said it manages roughly $2.8 trillion in total assets and about $340 billion in target‑date strategies.
Capital Group explained its dual objectives for target‑date design — building wealth in accumulation and preserving wealth in the distribution phase — and described a glide path that reduces equity exposure and pivots toward dividend‑oriented equities and shorter duration fixed income as participants near retirement. The presenters said their alpha breakdown is roughly 50% security selection, 20–25% strategic allocation and 30–35% from tactical, bottom‑up flexibility.
On plan operations, Capital Group confirmed its marketing materials and fact sheets are made available to the recordkeeper, Empower, and said participant‑level data is proprietary to the plan unless the plan grants access. Capital Group and Callan both told the board the defined‑contribution program is heavily defaulted: about 88% of DC assets are invested in target‑date funds and over 90% of participants who use a target date hold a single vintage.
Capital Group representatives discussed fees and structure. The presenters said the average fee across their target‑date suite was about 34 basis points (net of fees in performance reports) and described an implementation that uses multiple underlying sleeves and internal sleeves managed by multiple portfolio managers.
Callan and Capital Group staff recommended operational housekeeping items: when managers announce new vintages, Empower should be engaged promptly so recordkeeping and communication rollouts occur; and the board should consider adding the new American Funds vintages so younger participants have appropriate vintages available. The board moved to add American Funds target‑date vintages 2065 and 2070; the motion was seconded and the board approved the additions.
The board also approved the October minutes for the defined‑contribution meeting and heard a structure analysis from Callan that recommended no other immediate changes to the plan lineup. Callan noted the existing menu provides a passive sleeve and an active sleeve and that adding more style‑specific options was unnecessary at this time. The consultants suggested ongoing participant education about stable value versus money‑market options, given recent rate movements.
Capital Group and Callan closed by answering questions about participant behavior (inertia is high; managed accounts are used rarely among younger cohorts), compensation and research processes at Capital Group, and whether plan sponsors should consider adding or removing lineup options. The board voted to adjourn after the motion to add the American Funds vintages passed.
