Target-Date Funds Shrug off Criticism, Pull in Investors

By Ackerman, Ruthie | American Banker, April 7, 2010 | Go to article overview

Target-Date Funds Shrug off Criticism, Pull in Investors


Ackerman, Ruthie, American Banker


Byline: Ruthie Ackerman

After massive losses in 2008, many on Wall Street expected investors in target-date funds to pull out their assets and put their retirement savings elsewhere.

But according to Morningstar Inc., investors have ignored the losses and resulting criticism and made target-date funds the focus of their retirement savings.

Target-date funds are retirement plans that combine stocks, bonds and other investments, and become more conservative as the investor approaches retirement age.

These mutual funds take the guesswork out for investors by allowing them to choose the year they intend to retire and then setting asset allocations for them.

Morningstar's 2010 Target-Date Series Industry Survey, which includes research on 20 of the largest target-date series, found that more than $45 million in new cash flowed into these funds in 2009.

The survey examined investor returns, which reflect monthly flows in and out of funds, and the returns earned. With target-date funds, investor returns over the past three years far exceeded returns on a traditional mutual fund, according to the survey.

"Target-date funds have been the subject of unprecedented regulatory, governmental and media criticism in the wake of 2008's market slide, but that has not deterred millions of investors from making these funds the centerpiece of their retirement savings," said Laura Pavlenko Lutton, editorial director for Morningstar's mutual fund research group. "Target-date funds have become the retirement vehicle of a generation, and for some good reasons. The funds have structural advantages over traditional mutual funds, including generally lower costs and dynamic asset allocation that automatically grows more conservative as investors age."

Morningstar found that fund companies have responded to the recent criticism of target-date funds.

In general, fund families in the survey have tried to lower fees. And several fund series have attempted to reduce risk by lowering the funds' equity allocations, which is what led to such large losses in 2008.

But Lutton isn't sure that changing the funds' equity exposure is the answer.

"Lower fees directly benefit investors, but changes to the funds' equity exposure could leave the industry open to charges that it's fighting the last market battle, and not positioning the funds correctly for the future," she said. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Target-Date Funds Shrug off Criticism, Pull in Investors
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.