Designing target-date funds for new retirement realities
Fidelity and Sun Life Global Investments discuss how target-date funds are moving beyond age-based investing to focus on income, resilience, and the realities of modern retirement
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THE EVOLUTION of target-date funds is less a story of becoming overly complex and more a reflection of how retirement itself has changed. As members live longer, save at different rates, and approach retirement in less predictable ways, glide paths have become more intentional about the risks they manage, the retirement outcomes they target, and the investment tools they use to get there.
Today’s target-date funds increasingly look beyond volatility alone, incorporating measures such as sequence risk, income replacement ratios, and the probability of sustaining retirement income, while also considering strategies such as private markets and alternatives to help improve diversification, generate income, and provide downside protection.
The irony is that target-date funds haven’t become more complicated because managers are chasing complexity. They’ve become more complicated because it’s not enough to build a portfolio that only reduces risk with age. The challenge now is deciding which type of risks investors are faced with as they progress through the various stages of the life cycle. For many plan members, that’s still the attraction: make regular contributions, stay invested, and let the fund manager take care of the portfolio as retirement gets closer.
In a roundtable discussion, Chhad Aul and Farzan Qureshi of Sun Life Global Investments Inc. (SLGI) joined Jon Knowles and Stéphanie Mariamo of Fidelity. The discussion ranged from glide path design and active management to alternative investments, private markets, and the growing role personalization could play in the next generation of target-date funds.
Flipping the script on sequencing risk
Sequence-of-returns risk refers to the impact that poor market returns early in and into retirement can have on the sustainability of retirement income. It remains one of the more underweighted concerns in target-date design: the danger of a portfolio de-risking too early, leaving a retiree needing to take on risk again just as decades of drawdown begin. “We feel that sequence risk is being framed through too narrow a lens,” says Mariamo, vice president, institutional business development at Fidelity Canada Institutional.
The demographics make the case for her. Roughly a third of plan members retire before 65 and a third after age 69, while a growing share shift to part-time work or drift back into the workforce rather than retiring in one clean step.
Aul treats it as the central trade-off in glide path design. “There’s a lot of science in glide path design,” he says, “but there’s a lot of art as well, and a lot of that art comes down to the trade-off between accumulated assets and sequence risk.”
The heaviest weighting falls on the years immediately around retirement, where a static portfolio − one still stress-tested across decades of retirement scenarios − holds close to 20 percent in illiquid assets, built to add return and provide downside protection without reintroducing the volatility a longer growth allocation would carry.
Aul pushes back on any framing of alternatives as a single, interchangeable bucket. “It’s really important not to think of alts as some kind of homogeneous group that all deliver the same characteristics to the portfolio,” he says.
Quality private fixed income, in SLGI’s portfolios for more than a decade, helps reduce duration exposure while capturing a liquidity premium, a different trade-off than simply reaching further into credit for yield. Real assets, spanning real estate, infrastructure, and commodities, offer something else entirely: inflation protection and a smoother return profile, both more relevant given the inflation of recent years.
The to-versus-through retirement split holds
One of the biggest design decisions in a target-date fund is whether the glide path should reach its destination at retirement (“to”) or continue adjusting throughout (“through”) retirement. Both approaches are built around the same objective: helping members retire with enough assets while managing the risks they face along the way. The difference lies in where managers place the greatest emphasis.
The years immediately surrounding retirement deserve particular attention, as Aul sees it. A significant market decline just before or after someone leaves the workforce can have an outsized impact on the sustainability of their retirement income. It’s a question his team revisits regularly.
“We come back to this debate internally every couple of years,” he says. Each time, we arrive at the same conclusion: reducing portfolio risk by the retirement date offers the best balance between growing assets during the accumulation years and protecting members when sequence risk is at its highest.
Mariamo starts from the same objective but with a different time frame. “In our view, retirement is not the finishing line. There can still be another 20, 30 years, if not more,” she says. With Canadians living longer and virtually everyone remaining invested for decades after they stop working, she argues that portfolios should continue reflecting that long-term horizon. Retirement should be viewed as a transition point, not the end of the investment horizon, and it stands to reason that asset allocation should be designed accordingly. She points to the US market − where, by her account, 85 percent of target date assets sit in through-retirement designs − and questions why Canada should default to the opposite given how retirement income in Canada is delivered.
“Somebody goes to a financial advisor at 65, 75, or 85, they’re going to get a different portfolio. It’s not going to be a static one,” highlights Knowles. If retirement plans continue to evolve alongside investors’ needs, he argues, there is a case for target-date funds to do the same.
Fidelity Canada Institutional serves a diversified client base across all major asset classes, focusing on corporate and public defined benefit and defined contribution pension plans through the ClearPath suite of Active, Blend and Index Plus solutions, endowments and foundations, insurance companies, MEPPs, and financial institutions. Built on over 50 years of serving the needs of institutional investors worldwide, we offer active and risk-controlled disciplines, including Canadian, US, international, and global equity, fixed income, asset allocation, real estate, and custom solutions.
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Sun Life Global Investments was purpose built in 2010 to combine the strength of Sun Life with some of the best asset managers in the world. Since then, we’ve become a trusted wealth management firm for so many Canadians − managing over $58 billion across a diverse selection of retail mutual funds, insured wealth products, pension funds, and other institutional funds, including $12 billion in our flagship Sun Life Granite Target-Date Funds (as of June 30, 2024). As part of the Sun Life group of companies, we have access to a depth of resources, giving us (and ultimately our clients) unique advantages. We are driven by our goal to help plan sponsors deliver the best possible retirement for their members. And our unique advantages help us continually enhance our funds and develop new and innovative solutions to achieve this goal − to and through retirement. For more information, visit www.slgiinstitutional.com.
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Qureshi also flags a modelling point worth taking seriously after two decades of strong markets: many of these asset classes carry a fatter left tail than public equities, and SLGI’s process is built to avoid assuming a normal distribution when testing for that risk. That same risk discipline extends beyond asset-class selection to implementation decisions, including where active management can justify its cost. Once the appropriate exposures have been identified, the next question is how best to access them, and whether paying for active management is likely to add value.
Mariamo says the active-versus-passive decision ultimately comes down to a plan sponsor’s priorities. Some place the greatest value on cost certainty, while others see a compelling case for active management based on its ability to generate more wealth on a net-of-fee basis.
“There’s a lot of science in glide path design, but there’s a lot of art as well, and a lot of that art comes down to the trade-off between accumulated assets and sequence risk”
Chhad Aul, SLGI
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Rather than concentrating on a single measure of portfolio risk, Sun Life Global Investments now stress tests glide paths across thousands of market scenarios, modelling how different portfolios affect a range of outcomes, including the likelihood that members can replace their income efficiently in retirement. Aul ties the shift to the move by the Canadian Association of Pension Supervisory Authorities toward outcome-focused rules, which is also in the best interest of members.
Knowles, institutional portfolio manager in Global Asset Allocation at Fidelity Investments, traces the same change to accumulated experience. Target-date funds have been around for roughly three decades globally and two decades in Canada, long enough for managers to study how investors actually behave rather than making assumptions about their behaviour.
One finding that is particularly relevant is that target-date investors don’t sell out during volatility the way self-directed investors often do. “A typical do-it-yourself investor transacts at higher rates when markets get volatile. We don’t see that in target-date funds,” Knowles says. That discipline, paired with other factors, is what has let managers raise growth exposure across the industry.
The investment expertise already exists. The bigger hurdle is operational, creating a system that can deliver individualized portfolios to thousands of plan members efficiently and at scale.
The challenge with personalization is preserving the simplicity that made target-date funds successful in the first place. More individualized portfolios may improve the fit for members with very different savings patterns and retirement timelines, but added sophistication only has value if the solution remains clear, accessible, and easy to engage with.
Mariamo says the same principle applies to personalization. “This is not a topic of interest for every plan member,” she says, a reminder that even the most sophisticated investment solution only works if members are willing to stay invested and let it do its job.
For all the changes in target-date funds over the past two decades, one thing has remained consistent. Every glide path reflects a series of choices about which risks deserve the greatest attention. Those choices may continue to change as retirement changes, but they’re unlikely to become any simpler. As retirement becomes more varied from one member to the next, the decisions behind those portfolios are becoming more deliberate too – all in pursuit of providing members with the best retirement outcomes.
“It’s having those real quantitative metrics that you can measure against that delivers across retirement outcomes”
Farzan Qureshi, SLGI
From volatility to income replacement
Ten years ago, the conversation was largely about managing volatility. A glide path was expected to gradually reduce equity exposure as retirement approached, with success often measured through familiar metrics such as standard deviation or risk-adjusted returns.
That still matters, but Aul, chief investment officer and head of multi-asset solutions at SLGI Asset Management Inc., says, “The big evolution over the years has focused much more around specific outcomes that we can actually summarize and measure.”
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Stéphanie Mariamo
Fidelity
Chhad Aul
SLGI
Jon Knowles
Fidelity
Farzan Qureshi
SLGI
Farzan Qureshi is director, institutional business development and client relationships for SLGI, based in Toronto. In this role, Farzan is responsible for leading and building new relationships for the firm’s growing institutional asset management business in Ontario.
Farzan brings more than 20 years of experience in the investment industry, most notably from his tenure at BlackRock, where he began his career in trading, advanced through senior client-facing roles, and most recently contributed as a senior investment strategist within the retirement solutions (RS) team. RS served as the centre for life cycle investing, bringing together expertise in research, portfolio management, strategy, and technology.
SLGI
Farzan Qureshi
Jon Knowles, CFA, is an institutional portfolio manager in the Global Asset Allocation (GAA) group at Fidelity Investments. GAA is an investment team within Fidelity’s Asset Management Solutions division, an investment organization that provides industry-leading multi-asset solutions and liquid alternatives investment capabilities to the retail and institutional marketplace. In this role, Knowles serves as a member of the investment management team, maintaining a deep knowledge of portfolio philosophy, process, and construction; assisting portfolio managers and their CIOs in ensuring portfolios are managed in accordance with client expectations; and contributing to investment thought leadership in support of the team.
Fidelity
Jon Knowles
As chief investment officer and head of multi-asset solutions, Chhad Aul is responsible for the development, evolution, and execution of the investment philosophy, process, and team managing SLGI Asset Managements’ funds, separate accounts, and strategies. This includes chairing the asset allocation committee and investment oversight committee, and leading the activities of the multi-asset solutions team to drive performance and manage risk. Chhad is also an active member of Sun Life Global Investments leadership team.
When Chhad joined the company in 2014, he brought with him deep expertise in quantitative strategies, asset allocation, and investing with derivatives. He uses these strengths to build and manage sophisticated solutions for Canadian investors seeking broadly diversified portfolios.
SLGI
Chhad Aul
Stéphanie Mariamo is vice president, institutional business development, at Fidelity Canada Institutional. In this role, she is responsible for leading defined contribution (DC) business development efforts, focusing on capital accumulation plans, and working with consultants across Canada. Mariamo joined Fidelity in August 2024 and has more than 16 years of industry experience. Before taking her current role, Mariamo served as a senior DC consultant at Mercer and is distinguished as a strategic thought leader due to her technical expertise, deep industry knowledge, and strong relationship-building skills. Her extensive experience in pension management began with her role as an actuarial consultant for defined benefit pension plans prior to joining Mercer in 2015.
Fidelity
Stéphanie Mariamo
Published Sep 08, 2026
Fidelity: what “through retirement” looks like
Fidelity’s 2026 research found their “through” glide path produced greater wealth at age 65 in 74% of simulated environments.
Source: Bruno Weinberg Crocco, Jon Knowles, and Darren Zeng. Through versus To: Underappreciated and misunderstood, yet a key decision influencing outcomes. Fidelity Canada Institutional, March 2026.
Balanced growth exposure at retirement to support a long investment horizon
Thoughtfully diversifying age specific risks for better retirement outcomes
Retirement income adequacy, not volatility alone, guides portfolio decisions
Qureshi, who leads institutional business development at Sun Life Global Investments, says that shift has also changed how success is measured. Rather than relying on broad assumptions about retirement readiness, managers increasingly evaluate whether a glide path can deliver a specific level of retirement income. Income replacement ratios have become one of the industry’s central benchmarks, and, he notes, even the target itself has changed. Whereas 70 percent of pre-retirement income was once considered the standard, SLGI now models closer to 60 percent as an appropriate objective for most Canadian workers.
“It’s having those real quantitative metrics that you can measure against that delivers across retirement outcomes,” he says, and tracking it consistently gives managers a way to assess progress that didn’t exist a decade ago.
Knowles adds that the more useful version of this data isn’t a single plan-level average but a persona-based approach, modelling how the same glide path performs for members who save a lot, save little, just joined, or have been enrolled for decades. “Identifying these personas really reflects, in more granular detail, what those retirement outcomes actually mean for these individuals,” he says.
“Retirement should be viewed as a transition point, not the end of the investment horizon, and it stands to reason that asset allocation should be designed accordingly”
Stéphanie Mariamo, Fidelity
Alternatives, used for a purpose rather than as a category
Whichever risk a manager prioritizes, one of the tools for managing it sits outside public markets, and that shift brings a problem neither firm treats lightly: liquidity. Knowles raises it as a dimension the industry does not discuss enough, in part because it was scarcely a concern with target-date funds in the past. Alternative asset managers are used to large, lumpy redemptions from institutional clients, but “the underlying [investor] here is an individual shareholder that needs and wants and requires daily liquidity,” he says, a genuinely different demand profile that gets harder to manage as illiquid allocations grow.
Qureshi points to more than a decade of experience managing these asset classes as the operational basis for handling that tension, including the ability to reallocate private holdings across funds in a series when a large plan redeems.
“Somebody goes to a financial advisor at 65, 75, or 85, they’re going to get a different portfolio. It’s not going to be a static one”
Jon Knowles, Fidelity
Knowles says that distinction also depends on the market itself. Fidelity tends to favour passive strategies where markets are highly efficient − he points to Canadian real return bonds as one example − while focusing active management in areas such as US equities, where he says the firm has consistently added value, even during more challenging market environments.
Qureshi argues the recent success of passive investing should also be viewed in context. Much of that outperformance has come during an extended bull market dominated by a handful of large-cap stocks, conditions that may not persist, suggesting a broader market downturn could prove a more meaningful test of where active management shines.
Knowles sees a related risk in allowing cost to dominate the design discussion. He points to “the over-emphasis on lowest cost being the best solution,” arguing that fees should be considered alongside the investment capabilities and retirement outcomes a strategy is designed to deliver.
Quarterly, rather than semi-annual, de-risking
Private markets embedded in the glide path
Open architecture across managers and asset classes
Three risk paths for each retirement vintage
Source: https://institutional.fidelity.ca/en/insights/through_vs_to/
SLGI: What sets TDF Granite apart
Where the category goes next
The next chapter for target-date funds could take the category in two different directions: integrating guaranteed income and building more personalized investment journeys.
Qureshi sees merit in incorporating some form of guaranteed income within a target-date solution, though he acknowledges the industry has yet to find the right model. Similar approaches in the US have struggled to gain widespread adoption, largely because of the cost of guarantees and the trade-offs around liquidity and control.
“That’s a really interesting one that the industry might want to solve in a slightly different way than a typical annuity,” Qureshi says.
Personalization is another area attracting attention. Rather than designing a glide path around the average plan member, managers are exploring how factors such as savings rates, retirement timing, and account balances could shape a portfolio tailored to each individual.
