Voya Index Solution Portfolios delivered commendable absolute and relative returns during the review period, despite a slight underperformance compared to their strategic benchmarks on a net-of-fees basis. This outcome occurred within a dynamic global market environment that concluded the year with surprising strength, navigating challenges such as the U.S. government shutdown, decelerating job growth, and rising concerns over market valuations. A notable highlight was the strong performance of international equities, which outshone their domestic counterparts, propelled by robust earnings momentum and more appealing valuation metrics.
The Voya Index Solution Portfolios are specifically structured to adapt to the evolving risk-return profiles of participants as they advance in age, with the ultimate goal of maximizing the likelihood of a successful retirement. This comprehensive strategy entails a continuous evaluation of market conditions and strategic adjustments to asset allocation to align with long-term financial objectives. The recent period underscores the importance of a well-diversified approach, capable of capturing gains in various market segments while mitigating potential risks.
A critical component of this strategy involves tactical asset allocation, which positively influenced performance during the fourth quarter of 2025. Overweight positions in international developed equities proved beneficial, as these markets demonstrated superior growth and valuation characteristics. Conversely, an underweight allocation to U.S. mid-caps also contributed positively. However, overweights in duration detracted from returns, primarily due to a steepening yield curve, highlighting the complexities inherent in fixed income management.
Looking ahead, the portfolios have undergone strategic adjustments to optimize future performance and manage risk. This includes an increased exposure to international and emerging market equities, reflecting a bullish outlook on their continued growth potential. Simultaneously, there has been a deliberate reduction in U.S. equities and bonds to rebalance the portfolio's overall risk profile. Furthermore, the inclusion of S&P 500 Equal Weight is a key tactical move designed to mitigate concentration risk associated with mega-cap stocks and enhance overall diversification, aiming for a more resilient investment structure.
The overarching macroeconomic outlook supporting these strategic decisions forecasts moderate yet resilient global economic growth, a continued decline in U.S. inflation rates, and ongoing easing measures from the Federal Reserve. This environment is conducive to a balanced investment approach, favoring large-cap companies that are well-positioned to capitalize on transformative trends such as artificial intelligence and automation, alongside a focus on globally diversified opportunities. These forward-looking adjustments are intended to ensure the portfolios remain aligned with long-term objectives, leveraging anticipated market movements for sustained growth and retirement security.
