A mixture of inflows and strong equity performance pushed total target-date fund assets under management to a record $429 billion in the first quarter, according to a report issued Wednesday by Morningstar subsidiary Ibbotson Associates.
That's a 14% increase over the $376.2 billion in the previous quarter, confirmed Alexa Auerbach, a spokeswoman for Morningstar. Ibbotson and Morningstar track assets of open-end target-date funds, but they do not analyze custom target-date funds.
The average target-date fund returned 8.9% in the first quarter and 3% in the 12 months ended March 31.
The best-performing asset categories in the first quarter were U.S. large-cap growth, with a return of 14.7%; followed by emerging markets equity, 14.1%; and U.S. small-cap growth, 13.3%. For the 12 months ended March 31, categories with the best returns were TIPS, 12.2%; REITs, 11.3%; and U.S. large-cap growth, 11%.
Ibbotson's research covered 389 individual target-date funds in operation for at least one year from 48 fund families. “For the second consecutive quarter, all target maturity funds with at least a one-year history ended the period with a positive return,” the report said.
The report also said that Morningstar's mutual fund research team upgraded the target-date series from AllianceBernstein to “below average” from “bottom,” in its latest quarterly review of 22 large target-date families.
“The primary reason for this upgrade is the attractive pricing structure of the funds in which investors don't pay fees on the underlying funds which comprise” the AllianceBernstein target-fund series, the report said.
Morningstar's ranking system has five categories — top, above average, average, below average and bottom. Morningstar's evaluation features five criteria — performance, portfolio quality, price, fund managers and the fund's parent.
The OppenheimerFunds and DWS Investments target-date families still have “bottom” ratings. The target-date families from American Funds, J.P. Morgan, T. Rowe Price and Vanguard still have “top” ratings, the report said.