Assets in target-date funds rose to an estimated $2.8 trillion last year vs. $2.3 trillion in 2019, even though participant contributions dropped sharply, according to a Morningstar report.
Market appreciation drove about 90% of the target-date growth, said Morningstar's annual target date series report, issued Thursday.
"We estimate investors contributed a net $52.3 billion to target-date strategies, with CITs taking in approximately $59 billion and mutual funds experiencing net outflows of $6.7 billion," said the report, which combines assets of collective investment trusts plus official mutual funds.
Net inflows represented "a drop of 59% from the $128 billion we estimate was contributed in 2019," the report said.
The pandemic "weighed on investors and retirement savers' contributions over the course of 2020," Jason Kephart, strategist for the multiasset and alternative strategies manager research team at Morningstar, said Thursday in a news release.
"We saw total net inflows to target-date strategies fall, employers suspending 401(k) matches, and an increase in investor withdrawal rates," he added. "However, we think the target-date landscape is poised for continued growth and change. Longer-term trends show investors are prioritizing low-cost strategies and investing in collective investment trusts."