There’s plenty of information and research available on target date funds, but on custom target-date strategies (cTDF), not so much, at least according to a new report the Defined Contribution Institutional Investment Association.
“While there is a great deal of publicly available information on packaged (as in, mutual fund and collective investment trust) target date strategy performance and asset allocations, little to no comparative information exists on custom target date strategies,” the authors write.
It’s one reason DCIIA launched a custom TDF research initiative in 2017.
It found that the total cTDF market was an estimated $430 billion at year-end 2017, with the DCIIA sample accounting for roughly 80% of the total market.
cTDF Allocation
As one would expect, a majority of the average cTDF exposure is allocated to equities and fixed income.
The average allocation to equities for 2060 funds was 85%, falling to 28% for income funds, while the average allocation to fixed income increased from 7% for 2060 funds to 52% for income funds.
“The information gathered from it, and described in this report, provides DCIIA members and the broader retirement plan community with a previously unavailable overview of custom TDFs,” it adds.
Research contributors include such notable names as Chris Nikolich from AB, Brett Hammond at Capital Group, Bridget Bearden with DCIIA and Joshua Dietch at T. Rowe Price.
“The central focus of this initial study is to better understand the asset allocation approaches among custom TDF strategies,” they conclude. “Looking beyond this first iteration of its custom TDF research initiative, DCIIA looks forward to completing the custom TDF universe and expanding the data set.”
For example, DCIIA is investigating more detailed glide path analysis of: “to” versus “through” strategies, corporate versus public plans, and “off-the-shelf” versus custom structures.