Tuesday, January 31, 2017

New article: “Target Date Funds: What’s Under the Hood?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Target Date Funds: What’s Under the Hood?”

by Edwin J. Elton, Martin J. Gruber, Andre de Souza, and Christopher R. Blake

The brief’s key findings are:

  • While nearly 60 percent of new 401(k) participants have savings in target date funds (TDFs), little research has looked under the hood of this investment vehicle.
  • This analysis uses a unique dataset with extensive information on the underlying mutual funds that TDFs hold.
  • The results show that TDFs:
    • often invest in specialized assets (e.g., emerging markets and real estate);
    • charge fees that are only modestly higher than if an individual investor assembled a similar portfolio on his own; and
    • earn returns that are broadly in line with other mutual funds.
This brief is available here.

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