PLANSPONSOR - August/September 2018 - 8

TDF Analysis
The Next Generation
A
s of the second quarter of the
year, target-date fund (TDF)
assets had grown to $984.5 billion,
reflecting new flows in the trailing
12 months of $65.3 billion and an
asset change of 8.1% year over year. This
growth-nearing $1 trillion-shows the
continued demand for and investment in
these age-based mutual funds, as 69%
of defined contribution (DC) plans use
some sort of target-date fund as their
default investment, according to the 2017
PLANSPONSOR Defined Contribution
Survey.
A point-in-time analysis of the funds
can give some insight into fund usage.
For instance, examining some of the
Spotlighting industry data from PLANSPONSOR's proprietary research
newest funds such as the 2050+ shows
investment by, presumably, mostly investors
about 30 years old and planning to
retire between 2048 and 2052, when
they are about 63. The total assets for this
objective are currently $40.5 billion, with
a net new-flows rate, over the trailing 12
months, of 27.45%.
The growth of the 2050+ fund
appears to be astronomical, yet this is
more a reflection of the small base of
assets at the start of the quarter than a
commentary on the popularity of the
fund. Moreover, separate from flows, but
relative to growth of the fund segment:
Considering the bull equity market, one
would expect the TDFs with the longest
TDF Organic Growth by Objective YTD Through June 30
Objective
Total Assets ($b)
June 30
Target date 2050+
Target date 2046 - '50
Target date 2041 - '45
Target date 2036 - '40
Target date 2031 - '35
Target date 2026 - '30
Target date 2021 - '25
Target date 2016 - '20
Target date 2011 - '15
Target date 2000 - '10
Targt date - In rtrmt
TOTAL
Source: Strategic Insight, 1994 - 2018
$40,503
$75,670
$95,059
$140,478
$142,825
$187,712
$173,062
$161,408
$56,146
$21,821
$38,626
$1,133,309
Net New Flows
YTD - 6/2018
15.91%
7.19%
6.15%
3.39%
4.74%
3.20%
3.75%
-0.85%
-3.56%
-4.03%
-1.26%
The growth of
the 2050+ fund
appears to be
astronomical,
yet this is more
a reflection of
the small base
of assets ...
time horizons to be the largest beneficiaries
of the performance, as they generally
have the most exposure to the equity
markets.
To examine the funds for those on
Net New Flows
12 Months - 6/2018
27.45%
12.33%
11.12%
5.99%
8.82%
5.75%
7.57%
-0.34%
-5.38%
-7.34%
16.33%
the other side of the time horizon-i.e.,
retiree investors-it may make sense
that there is a negative flow rate for the
past six months among the following
segments: 2016 through 2020, 2011
through 2015, 2000 through 2010 and
the in-retirement funds.
The in-retirement funds have a positive
flow rate over the past 12 months,
which may be due to some of the targetdate
fund companies merging funds
into the in-retirement segment once a
fund hits its retirement date on the time
horizon/glide path.
It cannot be determined from these
numbers alone whether the negative
flows represent retirees using the funds
as a " through " investment and making
incremental withdrawals or their considering
the funds a " to " investment and
aggregating the whole of their plan nest
egg to other retirement vehicles.
-Judy Faust Hartnett
8 PLANSPONSOR.com August-September 2018
http://www.plansponsordigital.com/plansponsor/august-september_2018/TrackLink.action?pageName=8&exitLink=http%3A%2F%2FPLANSPONSOR.com
PLANSPONSOR - August/September 2018

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