The tool works by analyzing the glide path, the formula that determines the asset allocation of each vintage within a target-date series. The analysis focuses on two parts of the glide path, the vintage farthest from retirement and the vintage closest to retirement.

The tool uses a simple framework, asking the users to answer three questions. The questions are intended to frame how much equity exposure/risk a target-date vintage should have at these important inflection points along the glide path.

Question 1: What should a glide path favor early in a participant’s working life?

1. Maximum growth
2. Moderate growth
3. Balanced protection and growth
4. Moderate downside protection
5. Maximum downside protection

Question 2: What should a glide path favor as a participant nears retirement?

1. Maximum growth
2. Moderate growth
3. Balanced protection and growth
4. Moderate downside protection
5. Maximum downside protection

Question 3: In terms of income and wealth, what is most important for a target-date glide path to provide participants?

1. Sufficient income in retirement
2. Balance of income in retirement and ending wealth
3. Maximum wealth throughout retirement

The tool filters the universe of target-date series by a returns-based calculation of equity exposure/risk. Target-date vintages are sorted by a trailing 36-month regression versus global equities (represented by the MSCI All-Country World Index). Trailing beta from the regression is then normalized as a percentile within each universe (vintage farthest from retirement and vintage closest to retirement), with a higher trailing equity beta translating into a higher percentile score. Target-date managers are then placed on an XY scatter chart, based on their respective vintage ranks (vintage closest to retirement is on the X axis, and vintage farthest from retirement is on the Y axis).

The answers to questions 1 and 2 are scored on a scale of 1 through 5. The answer to question 3 is used to make a final adjustment of the previous questions and is scored in 1-point increments of -1, 0, and 1: -1 for “sufficient income in retirement,” 0 for “balance of income in retirement and ending wealth,” and 1 for “maximum ending wealth.”

The final score can theoretically range from 0 to 6, in 1-point increments, and is calculated as follows:

• Early accumulation phase = (question 1 + question 3)
• Preservation of capital phase = (question 2 + question 3)

Early accumulation result is derived as,

• If final score is greater than 3, plot in top-half
• If final score is less than 3, plot in bottom-half
• If final score = 3, no strong preference (show both top and bottom)

Near retirement date result is derived as,

• If final score is greater than 3, plot in right-half
• If final score is less than 3, plot in left-half
• If final score = 3, no strong preference (show both left and right sides)

The results are combined to focus on a specific quadrant (i.e., top-left, top-right, bottom-left, bottom-right).

Top-left quadrant: Target-date series that have above-average equity exposure in the farthest from retirement vintage and below-average equity exposure in the closest to retirement vintage.

Top-right quadrant: Target-date series that have above-average equity exposure both in the farthest from retirement vintage and closest to retirement vintage.

Bottom-left quadrant: Target-date series that have below-average equity exposure both in the farthest from retirement vintage and closest to retirement vintage.

Bottom-right quadrant: Target-date series that have below-average equity exposure in the farthest from retirement vintage and above-average equity exposure near the closest to retirement vintage.