Target date funds: solving for better retirement outcomes

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As the largest Canadian-based target date fund investment manager, Sun Life Global Investments’ evolving glidepath is paving the way to help sponsors meet their plan members’ retirement needs. Learn more about their innovative approach

THE CANADIAN ASSOCIATION OF PENSION SUPERVISORY AUTHORITIES (CAPSA) provides clear guidelines for sponsors of capital accumulation plans (CAPs). These guidelines specify factors that sponsors should look at when they select investment options, including their default investment option, the purpose of the CAP, the number and diversification of options, their liquidity, fees, and intended plan member outcomes. Target date funds (TDFs) have proven to be a popular “turnkey” or automated investment option for many CAPs, as one way plan sponsors can effectively meet their fiduciary responsibilities to plan members. According to Sun Life, approximately 68 percent of CAP sponsors selected a TDF series as their default investment option – and over 80 percent of plan members invest in TDFs.

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 $41.6 billion across a diverse selection of retail mutual funds, pension funds and other institutional funds, including $13.7 billion in our flagship Sun Life Granite Target Date Funds (as of March 31, 2025). 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.

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“There’s a lot of science that goes into designing a glidepath. But it’s an art as well”

Chhad Aul SLGI Asset Management Inc.

Evolving the glidepath for better retirement outcomes

Published Jun 16, 2025

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Directories

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News

RSS

Sitemap

Privacy

About us

External contributors

Authors

Terms & Conditions

People

Companies

About

Directories

Resources

Investments

Pensions

benefits

News

RSS

Sitemap

Privacy

About us

External contributors

Authors

Terms & Conditions

People

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Market risk Volatile / falling markets

Sequence risk Negative impact to portfolio during drawdowns

Inflation risk Erosion of purchasing power

Longevity risk Outliving savings

“Retirement outcomes can be quantified, with target date funds specifically designed to accomplish: 1) Increasing the probability of being retirement-ready with a strong target income replacement ratio; 2) Balancing income and investment protection across the glidepath; 3) Considering sequence risk near and into retirement”

Jason Zhang, SLGI Asset Management Inc.

The efficient construction of glidepaths through the investment manager is critical to help drive better retirement outcomes for plan members with TDFs. An effective glidepath will guide plan members’ investments and allocations to specific asset classes during the entire retirement investment journey – from the accumulation phase through to the decumulation phase, when effective risk management is more important. Investment managers design efficient glidepaths based on thousands of market scenarios. They use stress tests in their modelling and analysis, with the ultimate goal of delivering the strongest outcomes possible to plan members. Glidepath stress tests should also address four primary risks plan members face in their investment journeys:

#1 Market Risk: Financial market volatility can significantly impact a plan member’s wealth accumulation. Downside protection is important, but ensuring younger plan members have ample opportunity to grow their assets is also one of the biggest drivers of strong retirement outcomes. #2 Sequence Risk: This risk grows more pronounced as plan members approach retirement. It involves the potential negative impact of withdrawing funds during market downturns, and this behaviour can lead to a negative retirement outcome by divesting at the worst time. #3 Inflation Risk: The erosion of purchasing power from inflation is a big concern and can pose a threat to plan members’ standard of living in retirement. #4 Longevity Risk: With increasing life expectancies, plan members face the risk of outliving their savings too early in their retirement years.

Portfolio construction of TDFs also plays a key role in delivering outcomes to plan members. In recent years, it has evolved to be more sophisticated, with investment managers drawing from additional building blocks to improve the overall risk and return profile of TDFs. Enhanced glidepaths may now include:

Relying on speciality assets classes, such as direct real estate and infrastructure, to help provide income, inflation, and downside protection. Adding liquid alternatives, such as trend-following strategies, can help in periods of market turbulence. Lastly, specialty asset classes and liquid alternatives often exhibit low and even negative correlation to traditional equities. Using a multi-manager approach to source best-in-class managers, with a blend of fundamental and quantitative management approaches. Strategically combining active and passive strategies. Tactically adjusting the asset allocation and positions to respond to changing market conditions.

Navigating market volatility: the power of glidepaths

For Canadian plan members, geopolitical and market uncertainty is driving anxiety. In a Q1 2025 survey by Sun Life, more than half of members and plan sponsors expressed significant concerns about the proposed US tariffs and retaliatory Canadian tariffs. About two-thirds of respondents believe the US tariffs will impact their personal finances. This reinforces their feelings of anxiety and shapes their decisions around financial security in today’s uncertain economic climate. Importantly, for those surveyed who plan

to save more by reducing overall spending, “retirement” and “emergency funds” were the top two savings goals, at more than 70 percent and 50 percent, respectively. Recent market events have also underscored how well-designed TDFs and purpose-built glidepaths can help plan members navigate volatility. As the largest Canadian-based TDF investment manager, Sun Life Global Investments is seeing this play out in real time through its proprietary TDFs. As Jason Zhang, portfolio manager at SLGI Asset Management Inc., explains, “The early days of April 2025 provide a great example of how de-risking the glidepath and the structure of portfolios as plan members approach retirement can be of significant value in times of volatility.” For plan members far from retirement, market selloffs may appear as mere blips on their long-term journey. However, for those approaching retirement and those decumulating, these fluctuations can have a bigger impact. “As plan members glide toward retirement, the asset mix shifts toward lower equity content and a higher allocation to fixed income, including high-quality fixed income,” Zhang says. “In periods where equity markets have sold off significantly, we’ve seen resilience, a hedge and stability provided by high-quality bonds, really demonstrating the value of that glidepath approach. We’ve seen this in action in the glidepaths of Sun Life’s Granite Target Date Funds (Granite TDFs), as they protect plan members approaching or in retirement. Allocations to alternative fixed income can provide higher yields − and being able to tactically adjust exposures to include safe haven assets such as gold can help to provide diversified sources of returns in periods of heightened volatility.”

Innovative glidepath design: balancing science and art

At the heart of Granite TDFs is a carefully crafted glidepath that centres around the investing journey from aggressive wealth accumulation to wealth preservation and sustainable income. Enhanced glidepaths are the result of the multi-asset solutions team’s extensive research, robust stress-testing, and a balance of quantitative analysis and qualitative judgment. “There’s a lot of science that goes into designing a glidepath,” says Chhad Aul, chief investment officer and head of multi-asset solutions at SLGI Asset Management Inc. “But it’s an art as well.” Chhad Aul, Jason Zhang, and the multi-asset solutions team at SLGI Asset Management Inc. formally review the glidepaths and long-term strategic target allocations of the Granite TDFs each year. They employ in-depth analysis and stress-testing to ensure the best possible outcomes for plan members at, and in, retirement. Taking it a step further, Zhang explains, “Retirement outcomes can be quantified, with target date funds specifically designed to accomplish: 1) Increasing the probability of being retirement-ready with a strong target income replacement ratio; 2) Balancing income and investment protection across the glidepath; 3) Considering sequence risk near and into retirement.” The retirement outcomes and glidepath design process of the Granite TDFs are measured using five proprietary key performance metrics. Each test addresses specific aspects of pre-retirement and post-retirement risks.

1. Utility scores: Assesses how well a glidepath balances returns and downside risk. 2. Wealth accumulation: Evaluates the glidepath’s ability to generate wealth at retirement across thousands of scenarios. 3. Near-retirement drawdown: Focuses on sequence risk for investors within five years of retiring, involving thousands of cross-asset scenarios. 4. Retirement readiness: Assesses a plan member’s ability to maintain their standard of living in retirement with a strong target income replacement ratio (i.e., percentage of pre-retirement income replaced by retirement income). 5. Spend-down resilience: Assesses the risk of running out of money early in retirement.

Utility scores How well a glidepath balances risk and return

Wealth accumulation Looking for strong accumulated assets

Near retirement drawdown Stress-testing for worst-case scenarios near retirement (fear of loss)

Retirement readiness Maintain standard of living into retirement (as a % of final salary)

Spend-down resilience Mitigating the risk that plan members outlive their assets

ENHANCED STRESS-TESTING TO BUILD A SUPERIOR GLIDEPATH

Creating better retirement outcomes for plan members with target date funds

Market volatility and economic uncertainty is spurring Canadian plan members to seek advice on how they should adjust their investment strategies and portfolios. They are looking for active risk management in their portfolio with options for more stable investments. The commitment to better retirement outcomes for plan members matters. By using an experienced TDF provider, plan sponsors can now measure and track expected retirement outcomes. Importantly, it also brings plan sponsors further in line with CAPSA guidelines, giving them quantifiable metrics on the TDFs’ intended member outcomes. TDFs represent a significant step forward to address the complex risks and evolving needs of today’s Canadian plan members. By combining innovative glidepath and portfolio design focused on retirement outcomes, along with reporting on intended retirement outcomes, TDF providers create better retirement outcomes for plan members and help plan sponsors meet their fiduciary responsibilities.

Sun Life, Designed for Savings 2023 Report. Sun Life Client Sentiment Survey, U.S.-Canada Tariffs. Study fielded March 10-17, 2025.

THE CANADIAN Association of Pension Supervisory Authorities (CAPSA) provides clear guidelines for sponsors of capital accumulation plans (CAPs). These guidelines specify factors that sponsors should look at when they select investment options, including their default investment option, the purpose of the CAP, the number and diversification of options, their liquidity, fees, and intended plan member outcomes. Target date funds (TDFs) have proven to be a popular “turnkey” or automated investment option for many CAPs, as one way plan sponsors can effectively meet their fiduciary responsibilities to plan members. According to Sun Life, approximately 68 percent of CAP sponsors selected a TDF series as their default investment option – and over 80 percent of plan members invest in TDFs.

All investment solutions are offered as segregated funds for group retirement plans exclusively by Sun Life Assurance Company of Canada, through Sun Life Group Retirement Services, a member of the Sun Life group of companies. SLGI Asset Management Inc. is the investment manager of the Sun Life Mutual Funds, Sun Life Granite Managed Solutions and Sun Life Private Investment Pools. Sun Life Global Investments is a trade name of SLGI Asset Management Inc., Sun Life Assurance Company of Canada and Sun Life Financial Trust Inc. all of which are members of the Sun Life group of companies. © SLGI Asset Management Inc. and its licensors, 2025. SLGI Asset Management Inc. is a member of the Sun Life group of companies. All rights reserved.