Morningstar Inc. still can't determine whether open architecture is better than closed architecture in the design of target-date funds.
Two years ago, the Chicago-based financial research firm issued a report saying there was no correlation in performance among fund families that used outside subadvisers, in-house managers or a mixture of the two.
Nearly three weeks ago, the firm said it can't declare a winner. “New data, same story” was the headline in a Morningstar report.
“It validates what we saw two years ago,” Joshua Charlson, senior fund analyst, said in an interview.
“In theory, broadly speaking, choosing the pick of the litter should provide an advantage, but it doesn't,” said Mr. Charlson, referring to sponsors offering open-architecture target-date funds.
“Our research doesn't invalidate the choice of someone who wants diverse managers,” said Mr. Charlson, adding that his firm views each architecture approach equally.
When Morningstar issued its first architecture report in 2010, Mr. Charlson noted at the time that the industry was still relatively young and that extra years of data could produce a more comprehensive analysis.
Today, there are more target-date fund families with at least three years of performance history, but the latest research “fails to support the contention that open-architecture target-date funds are superior to closed-architecture offerings,” the Morningstar report said. “If anything, closed architecture series appear to have a slightly better track record.”
Morningstar identified three design categories: