Your Default Fund Has Changed. Has Your Risk Assessment Kept Up? 

Default fund design within Canadian defined contribution (DC) plans has changed more than most plan sponsors may realize. Over the past decade, persistently strong equity markets have pushed glide path equity weights steadily higher, even as the underlying market has become increasingly concentrated in a smaller number of large companies. The Canadian Association of Pension Supervisory Authorities (CAPSA) guidance clearly emphasizes that suitability and diversification must be assessed across multiple dimensions, and that age alone is not enough to determine an appropriate level of risk.

TD Global Investment Solutions' white paper, The Silent Retirement Risk Shift, unpacks this structural shift in plain terms. It walks through how equity weights across target date vintages have moved higher since 2015, how concentration in a handful of large-cap stocks can leave default funds are less diversified than their labels suggest, and what history reveals about the time required to recover from major drawdowns.

Key takeaways:

• Default fund equity allocations have risen steadily over the past decade, leaving members approaching retirement more exposed to market volatility than traditional glide path design may suggest
• Increasing market concentration means many default funds may be less diversified than their headline equity weights imply
• Higher equity allocations have not reliably translated into better long-term outcomes, while broader diversification across asset classes has shown the potential to improve risk-adjusted results
• Default fund design should be a deliberate, regularly reviewed decision rather than an assumption carried forward from prior market conditions

Download the free white paper now to see what today's default funds may be missing, and what plan sponsors can do about it.

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