SAN DIEGO, CA--(Marketwired - Jun 24, 2014) - BrightScope (www.brightscope.com), a leading provider of independent financial information and investment research, today announced recent trends in target date funds (TDFs) as a result of its examination of the lowest cost institutional share class for all target date funds through December 2013. This includes 52 target date series, composed of 479 distinct target date funds from 39 different asset managers.
"Last year target date asset growth was strong, fueled by a strong equity market and ongoing acknowledgement by plan sponsors and advisors that defined contribution participants prefer to have retirement accounts professionally managed," said Brooks Herman, Head of Data & Research at BrightScope. "Target date funds continue to be the vehicle of choice to meet this need."
BrightScope's Findings and Observations on the TDF Market
Fees
Fees continue to fall: they are down to an average of 0.67 percent for the lowest cost institutional share class for all target date funds, a steady drop from 0.70 percent in 2012 and 0.72 percent in 2011.
Assets Under Management (AUM)
In 2013, target date fund assets increased 24 percent to nearly $625 billion in Investment Company Act of 1940 funds. BrightScope estimates total target date assets are actually closer to $900 billion when collective investment trusts and pooled separate accounts are added.
Three years ago, BrightScope predicted that target date assets would top $2 trillion by 2020, a prediction they continue to stand by today.
Entrants and Exits:
In 2012, the target date series market saw two exits and two entrances. This was the first time there was a reduction in target date series. In 2013, the trend reversed itself with the addition of the following new target date series:
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JHancock Retirement Living through II
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KP Retirement Path
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Strategic Advisers Multi-Manager
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T. Rowe Price Target Retirement
Glidepath and Landing Point
From 2012 to 2013, gildepath's stability continued. Equity at the stated target date for funds was 41 percent, up from 40 percent the previous year. Meanwhile, equity at the landing point (the most conservative point of the glidepath) kept steady from 2012 at 30 percent.
To/Through
For 2014, 42 percent of fund families brought their glidepath down to its most conservative position at the target date (BrightScope's definition of a "To" fund series), representing 22 of the 52 fund families. All four new fund series in the marketplace are "Through" funds, when a target date fund's glidepath continues to get more conservative after the target date.