Target-date funds’ popularity has exploded since the end of the financial crisis, and for good reason. They offer a set-and-forget investment option that allocates and adjusts assets to meet investors’ risk and return priorities over their investment horizon. While equity allocations are greater in longer-dated funds, and therefore riskier, often overlooked is how the contributors to risk differ among providers.
*Does not pertain to the use of active or index strategies in the funds. Research based on 10 largest TDF series. Sources: Bloomberg LP, eVestment LLC, Morningstar Inc., Plan Sponsor Council of America, with thanks to David Blanchette at Morningstar.