PLANSPONSOR - August/September 2019 - 32

2019 PLANSPONSOR TARGET-DATE FUND SURVEY
Market Share of Top 5 vs. Remaining Target-Date Mutual Funds
passive or some sort of hybrid/blend
option-to scrutinize funds' management
style.
This year, 21 out of 70 funds use
a hybrid or active/passive approach;
24 use an active approach; 19 use an
index or passive approach; five identify
themselves as " blends, " and one is
factor-based. Passive exposures help
keep participant expenses low, while
active exposures provide participants
the potential for added incremental
returns and the mitigation of key investment
risks, according to a recent PGIM
Investments report.
One reason PGIM suggests that
hybrid approaches may be on the rise now
is that active exposures can help mitigate
market declines and interest rate volatility.
This year's survey shows an increase
in the number of TDF products that allow
the investment manager some tactical
deviation from the glide path-to 42,
up from 36, when we last ran our TDF
Survey, in 2017. Is this an indication that
managers are preparing for increased
market volatility and want to have flexibility
to respond?
Another area that has evolved over
multiple TDF surveys is the number of
funds that include nonproprietary funds
within the investment. This presence of
an unaffiliated manager overseeing at
least one part of the portfolio is referred
to as open architecture-it can help firms
avoid a conflict of interest if they offer
nonproprietary products in their TDFs.
Thirty-two of the funds we list provide
this feature; however, the managers of the
largest TDFs-Vanguard, Fidelity, T. Rowe
Price and American Funds-do not.
Of course, there are also options
beyond off-the-shelf funds. Sponsors
unable to find an appropriate prepackaged
TDF solution might consider a custom
fund. Thereby, the sponsor can work with
an asset manager to specify glide path
construction, underlying asset allocation
and ongoing advisement. Eight asset
managers (see page 33) provided details
about that option. -Judy Faust Hartnett
33.6%
Vanguard
Fidelity
21.2%
16.4%
7.2%
5.0%
16.6 %
June 2017
T. Rowe Price
American Funds
J.P. Morgan
Remaining
37.8%
19.4%
12.4%
10.5%
4.3%
15.6%
June 2019
Target-Date Mutual Fund Performance by Objective
Weighted Average Total Return as of June 30, 2019
Income
2000-2010
2011-2015
2016-2020
2021-2025
2026-2030
2031-2035
2036-2040
2041-2045
2046-2050
2051-2055
2056-2060
2060+
Source: Strategic Insight
Q2 2019
8.8%
9.5%
10.1%
11.3%
12.3%
13.4%
14.4%
15.1%
15.5%
15.5%
15.6%
15.5%
15.5%
1-YEAR
6.3%
6.1%
6.2%
6.2%
6.3%
6.1%
5.8%
5.6%
5.6%
5.6%
5.6%
5.7%
5.9%
3-YEAR
5.3%
6.5%
6.9%
7.8%
8.7%
9.6%
10.4%
10.9%
11.2%
11.2%
11.2%
11.2%
NA
5-YEAR
4.1%
4.6%
5.0%
5.4%
5.8%
6.3%
6.6%
6.8%
7.0%
7.0%
7.0%
6.8%
NA
NA = Not applicable.
32 PLANSPONSOR.com August - September 2019
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