It’s Official, Target-Date Funds Outperform

Recent Morningstar research has TDF providers popping the bubbly.

The Chicago-based research firm released findings from its 2015 Target-Date Fund Landscape Report.” According to the report, the asset-weighted average investor returns of target-date funds, which take fund flows into account to estimate a typical investor’s experience in a fund, are 1.1 percentage points higher than the funds’ average total returns—suggesting that, on average, target-date fund investors are using the funds effectively. Other finding include:

Janet Yang, Morningstar’s director of multi-asset class manager research, said, “The positive gap between investor returns and total returns in target-date funds indicates those investors are capturing all of the funds’ total return, and more, thanks to the timing of their purchases and sales. Target-date funds are default investments for many retirement plans, and the steady inflows during the strong market environment in recent years likely explains this positive gap.”

Additional findings of the report include:

“It’s not surprising that as the target-date industry has continued to mature, growth would slow. Nevertheless, target-date funds still notched the third-highest organic growth rate of any U.S. category last year, further cementing their status as the investment of choice for U.S. workers’ retirement savings,” Yang said.

Exit mobile version