Benchmarking target-date funds

In regard to “Benchmarking "to' and "through' target-date funds,” the commentary by Philip Murphy, published Sept. 12 at PIonline.com:

It's important to realize “to” funds can be riskier than “through” funds, so the demographic argument doesn't stand up to scrutiny. The industry has decided to define “to” as flat equity exposure beyond the target date. All constant-mix balanced funds are “to” funds by this definition, as are all equity funds — 100% equities beyond the target date. Importantly, some “through” funds reach the target date with lower equity exposure than some “to” funds.

There are really only two choices for a target-date benchmark: consensus or prudent. The S&P Target Date indexes are consensus indexes, a reasonable choice. There is an alternative provided by the patent-pending Safe Landing Glide Path, which meets the CFA Institute's criteria for benchmarks, including investibility.

Ronald Surz

President, Target Date Solutions,

Division of PPCA Inc.

San Clemente, Calif.

This article originally appeared in the October 1, 2012 print issue as, "Benchmarking target-date funds".