Target-date contributions are steadily rising from their fall in 2020.
New findings from Morningstar show target-date mutual funds rose at the end of 2022 to $32.3 billion—a 35% jump from the $24 billion collected at year-end 2021. While it’s not the $69.9 billion that peaked in 2017, the increase shows a stark recovery from the target-date contributions during the COVID-19 pandemic in 2020.
Morningstar attributes the slow growth to the rising popularity of collective investment trusts (CITs), which have gained interest in the past years due to their low fees. At the end of 2021, close to 45% of target-date assets were in CITs, compared to just under 20% in 2014. Additionally, CITs accounted for 86% of target-date strategy net inflows in 2021.
Morningstar names 2022 winners in most flows
In its analysis, Morningstar rated American Funds Target Date Retirement as the mutual fund series who saw the largest number of flows in 2022. The Fidelity Freedom Index series, who was the consecutive top winner before American Funds dethroned them in 2022, placed second this year. This was followed by the Vanguard Target Retirement series securing third place.
American Fund also earned a Morningstar Analyst Rating of Gold for its cheapest share class and was the only target-date series in the top 10 group with all active underlying funds that continued to experience stronger net inflows, according to Morningstar. Over the past 10 years, the series delivered higher returns than nearly 99% of its peers.
Fidelity’s Freedom Blend series secured $1.8 billion in inflows, while its flagship series, Fidelity Freedom, received $9.6 billion in net outflows, for the most outflows of any target-date mutual fund series in 2022, said Morningstar.
Lastly, Vanguard Target Retirement saw $52.6 billion in net inflows to its CIT series. At the end of 2022, its mutual fund assets were at $522 billion.
SEE ALSO:
- Way Too Much Risk in 401k Target-Date Fund Glide Paths: Morningstar
- Episode 36: Morningstar’s Christine Benz Defends Target-Date Funds from Recent Attack, Describes Possible End to Backdoor Roths
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
