PLANADVISER - July/August 2018 - 1

Figure 1: Active fixed income seeks to deliver better retirement outcomes
n Industry average glide path (all passive)1
n Industry average glide path (active fixed income)2
Hypothetical 40-year Investment: cumulative impact of active fixed income
$700
19%
600
9%
500
400
15
300
$461k
200
100
Ending account balance
Asset longevity
Source: Morningstar, PIMCO, and Employee Benefit Research Institute (EBRI) as of 31 December 2017
Hypothetical example for illustrative purposes only.
1
Term Bond Category.
2
5
i As of 31 December 2017. Based on prospectus net expense
Represented by median expense ratio of managers categorized as an " Index Fund " within the Morningstar IntermediateAssumes
a hypothetical 100 basis points of alpha generated from the fixed income portion of the industry average glide
path, as provided by Morningstar.
Salary and contribution assumption based on Employee Benefit Research Institute data. Return assumptions based on
PIMCO's super secular capital market assumptions.
No representation is being made that any PIMCO account, product, or strategy will or is likely to achieve profits, losses, or
results similar to those shown.
Past performance is not a guarantee or a reliable indicator of future results. All investments
contain risk and may lose value. Investing in the bond market is subject to risks, including
market, interest rate, issuer, credit, inflation risk, and liquidity risk. The value of most bonds
and bond strategies are impacted by changes in interest rates. Bonds and bond strategies
with longer durations tend to be more sensitive and volatile than those with shorter durations;
bond prices generally fall as interest rates rise, and the current low interest rate environment
increases this risk. Current reductions in bond counterparty capacity may contribute
to decreased market liquidity and increased price volatility. Bond investments may be worth
more or less than the original cost when redeemed. Equities may decline in value due to both
real and perceived general market, economic and industry conditions. Investing in foreigndenominated
and/or -domiciled securities may involve heightened risk due to currency fluctuations,
and economic and political risks, which may be enhanced in emerging markets. Diversification
does not ensure against loss.
Glide Path is the asset allocation within a Target Date Strategy (also known as a Lifecycle or
Target Maturity strategy) that adjusts over time as the participant's age increases and their
time horizon to retirement shortens. The basis of the Glide Path is to reduce the portfolio risk
as the participant's time horizon decreases. Typically, younger participants with a longer time
horizon to retirement have sufficient time to recover from market losses, their investment risk
level is higher, and they are able to make larger contributions (depending on various factors
such as salary, savings, account balance, etc.). Generally, older participants and eligible
retirees have shorter time horizons to retirement and their investment risk level declines as
preserving income wealth becomes more important.
Hypothetical examples are for illustrative purposes only. No representation is being made that
any account, product, or strategy will or is likely to achieve profits, losses, or results similar
to those shown. Hypothetical or simulated performance results have several inherent limitations.
Unlike an actual performance record, simulated results do not represent actual perforratio
of actively-managed funds relative to " Index Fund "
strategies, as defined by Morningstar. Average fee premium
based on average premium across the fixed income and
equity Morningstar categories specified below. Based on
Morningstar U.S. ETF and U.S. Open-End Fund Categories
(Institutional shares only). Large cap represented by Morningstar
U.S. Large Cap Blend category, Small Cap represented
by Morningstar U.S. Small Cap Blend category, Global
(equities) represented by Morningstar World Equity category,
Core represented by Morningstar Intermediate-Term Bond
category, High Yield represented by Morningstar U.S. High
Yield Bond category, Global (bonds) represented by Morningstar
World Bond category.
ii
Refers to intermediate-term, global and high yield bonds,
three of the largest fixed income categories in DC plans.
iii
Refers to large cap, small cap and global, three of the
largest equity categories in DC plans.
mance and are generally prepared with the benefit of hindsight. There are frequently sharp
differences between simulated performance results and the actual results subsequently
achieved by any particular account, product or strategy. In addition, since trades have not actually
been executed, simulated results cannot account for the impact of certain market risks
such as lack of liquidity. There are numerous other factors related to the markets in general
or the implementation of any specific investment strategy, which cannot be fully accounted
for in the preparation of simulated results and all of which can adversely affect actual results.
Statements concerning financial market trends or portfolio strategies are based on current
market conditions, which will fluctuate. There is no guarantee that these investment strategies
will work under all market conditions or are suitable for all investors and each investor
should evaluate their ability to invest for the long term, especially during periods of downturn
in the market. Outlook and strategies are subject to change without notice. Performance
results for certain charts and graphs may be limited by date ranges specified on those charts
and graphs; different time periods may produce different results.
This material contains the opinions of the manager and such opinions are subject to change
without notice. This material has been distributed for informational purposes only and should
not be considered as investment advice or a recommendation of any particular security,
strategy or investment product. Information contained herein has been obtained from sources
believed to be reliable, but not guaranteed. No part of this material may be reproduced in any
form, or referred to in any other publication, without express written permission. PIMCO is a
trademark of Allianz Asset Management of America L.P. in the United States and throughout
the world. Pacific Investment Management LLC, 650 Newport Center Drive, Newport Beach,
CA 92660, 800-387-4626. ©2018, PIMCO.
CMR2018-0710-343765
21 years
10
improvement
$39k
4.1 years
20
improvement
25
30
scaling up assets as a means to reduce fees
on behalf of all participants.
We're also seeing more sponsors
reviewing plan structure,
including retirement
income options. Interest has centered
on evaluating risk-managed, market-based
solutions that have the potential to convert
wealth into steady monthly payouts, provide
a measure of principal protection and some
assurance of asset longevity, as opposed to
insurance guarantees.
PIMCO and others also are calling for
the addition of a fourth tier on DC menus for
retirement income. This would be an important
step forward and spur innovation. In
addition, if paired with appropriate participant
education and retirement income tools,
a fourth tier would provide participants with
clarity around investment solutions that are
appropriate for the decumulation phase.
SPONSORED SECTION
Real ending account balance (USD, thousands)
Longevity of assets (years)

PLANADVISER - July/August 2018

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