The financial press, special interest groups and industry observers regularly compare defined benefit plan and endowment returns to a benchmark of 60% equities/40% bonds. The comparison is less frequently made to target-date strategies.
As Robert Arnott, Katrina Sherrerd and Lillian Wu pointed out in the Fall 2013 issue of the Journal of Retirement, target-date strategies underperform a balanced stock and bond portfolio. Since the publication of their article, a 2030 target-date strategy has continued to underperform a balanced portfolio. A 60/40 portfolio has outperformed on an absolute basis and has done so with less risk.
Over a 15-year period, 2030 target-date strategies, as measured by the S&P Target Date 2030 Total Return index, returned 4.67% annually. A 60/40 portfolio, as measured by the Russell 3000 index and Barclays U.S. Aggregate index, returned 5.78% annually with three quarters the volatility. If one used the MSCI ACWI IMI index instead of the Russell 3000, the 60/40 mix would still have outperformed over the long term with less risk, but the outperformance was less dramatic.