TDF Glidepaths Change Little in 2011
May 8, 2012 (PLANSPONSOR.com) – It was a relatively quiet year on the target-date fund glide path front—at least as far as major equity/fixed-income changes go, according to Morningstar’s annual Target-Date Fund Industry Survey.
It appears likely that any series stung by poor asset allocation in 2008’s market crash have already implemented subsequent changes. Thus, there is minimal difference in the series’ 2010 and 2011 asset allocations, Morningstar said.
Longer-dated funds from target-date 2040 onward show little substantive difference in their average equity allocation, which ranges from 87% to 92%. By contrast, the range of allocations for shorter-dated funds remains wide by any definition. Funds with a 2015 target-date average 52% in equities, but the minimum allocation is 20% and the maximum reaches 78%.
The industry looks tipped slightly more in favor of “through” glide paths than it did last year. Of the 41 glide paths included in the 2011 survey, 22 were in the “through” camp and 19 in the “to” camp. This year, out of 46 glide paths considered, 28 are “through” compared with 18 in the “to” camp.
In 2011, target-date funds produced their worst absolute and relative returns since 2008 as measured by the Morningstar target-date category average returns. However, those results were mild by comparison with the wreckage of the financial crisis. The worst-performing category, Target Date 2050+, produced a 4.1% loss, compared with a 38.8% loss in 2008. The 2011-15 category finished slightly in the red, with a 0.3% loss, versus a 27.7% loss in 2008.