The average target-date fund tracked by Morningstar posted a -11.8% return for the third quarter, according to a report by Ibbotson Associates, a unit of Chicago-based Morningstar.
For the 12 months ended Sept. 30, the average target-date fund return was -1.4%, the first 12-month span since the period ended June 30, 2009, in which the average target-date fund return was negative, the report said.
“Quarterly asset flows of $6.3 billion into target-date funds were at their lowest level since the 2008 financial crisis,” the report said. The decline “is likely partially related to the large-scale movement of megaplans to custom target-date solutions and alternative structures, such as collective investment trusts,” the report said.
Ibbotson analyzed results of 383 target-date funds in 46 fund families. Morningstar only tracks results of open-end target-date funds.
The flows are still positive,” Joshua Charlson, senior mutual fund analyst at Morningstar, said in an interview. “It's just that the pace is slowing down.”
Mr. Charlson added that Morningstar could not determine how much the decreased flows into target-date funds reflected investor decisions to choose other investments or to reduce the amounts of their overall investments.
The third-quarter 2011 inflows of $6.3 billion represented a 42% drop from the second quarter, according to the report. That second-quarter figure represented 34% decline from first-quarter flows.
Total target-date fund assets under management were $345.56 billion at the end of the third quarter vs. $384.75 billion at the end of the second quarter, the report said.
