An emerging trend in U.S. defined contribution investment strategies is the ‘blend trend,’ which is a target-date solution that allocates to underlying building blocks that are managed both actively and passively.

During a session at Benefits Canada’s 2025 DC Plan Summit, Jessica Sclafani, global retirement strategist at T. Rowe Price, shared data from the investment manager’s 2025 DC consultants’ study, which found this type of target-date solution garnered the greatest level of support among respondents.

While only nine per cent of total assets in the U.S. target-date market currently reside within a blend solution, it shows the highest compounded growth rate when compared to only actively or passively managed solutions, she said.

Read: 2024 DC Investment Forum: Three tips for picking the right target-date fund

“Generally speaking, we see plan sponsors are drawn to a blend strategy because they have a desire to offer members the benefits of active management, which include things like diversification and potential for excess return, but they want to do so in a way that’s most palatable from a fee perspective and that’s where blend really shines.”

Taking the active versus passive debate further, the study found DC consultants saw the highest alpha opportunity for active management in private investments, followed by return-seeking fixed income strategies, while they took a generally balanced view on equities, said Sclafani.

Digging a bit further into investment trends, she said the dynamic interest rate environment of the past few years has sharpened a focus on fixed income. “We’ve observed more plan sponsors thinking about fixed income, not only within the core menu, but also how targeted solutions are allocating to fixed income, the absolute level of the fixed income across the glide path and then also, how that fixed income allocation is built, how diversified is it.”

Indeed, the 2024 consultants’ study found 89 per cent of respondents have seen a greater focus on fixed income diversification opportunities, a 41 percentage point jump from the 2021 study. Looking at plan sponsor data, Sclafani noted 71 per cent said fixed income oversight now requires more time and attention than in previous years. When asked why they’ve re-evaluated their fixed income investment options, 61 per cent of plan sponsors pointed to concerns about the inflationary environment.

Read: Head to head: Should pension plans be investing actively or passively?

Turning to decumulation, Sclafani compared the consultants’ study over several years, highlighting a rise in DC plan sponsors taking a view on retirement income. Indeed, in 2021, more than half (59 per cent) of DC plan sponsors didn’t have an opinion on decumulation, which declined to 24 per cent in 2023 and one-fifth in 2024.

“That doesn’t mean that they’re necessarily implementing retirement income, but they’re much more likely to have a view one way or the other.”

In terms of the investments in a decumulation solution, she noted a growing interest in harnessing the power of the default solution, which is mostly likely to be a target-date fund.

Read more coverage of the 2025 DC Plan Summit.