Displaying items by tag: target date funds

In early 2025, target date fund (TDF) investors experienced a setback as U.S. stock markets declined sharply, with a 12% year-to-date loss driven by tariffs and fears of a market correction. For years, diversification beyond U.S. equities hurt performance, but that trend reversed as global factors began to weigh on domestic markets. 

The SMART TDF Index, which models ideal TDF allocations with better risk management, has outperformed the industry standard, revealing that most TDFs are overexposed to risky U.S. assets. April’s turbulence, sparked by the April 2 “Liberation Day” tariffs and further losses in the S&P 500, has intensified concerns about sequence-of-return risk, especially for those nearing retirement. 

Despite historical lessons and available low-risk alternatives like the SMART Index and TSP, most TDFs remain unprepared for prolonged downturns. 

Finsum: With fear dominating investor sentiment, now may be the time to rethink how TDFs protect retirement savers.

State Street Global Advisors has launched a new series of target date funds—called the Target Retirement IndexPlus Strategy—that includes a 10% allocation to private markets managed by Apollo. 

These funds, structured as collective investment trusts (CITs), pair State Street’s index strategies for public markets with Apollo’s evergreen fund providing exposure to private credit, equity, and real assets. Brendan Curran of State Street likens this evolution to shifting into a new gear in retirement investing, acknowledging the growing significance of private assets in diversified portfolios. 

The collaboration follows earlier efforts between State Street and Apollo, including the launch of a private credit ETF. Apollo views this as part of its broader push to tap into the wealth management space and expand access to private investments, aiming to grow its assets in this segment to $150 billion by 2029. 

Finsum: The launch reflects a broader trend of asset managers integrating private markets into retirement solutions to meet demand for diversification and improved outcomes.

Voya Financial is expanding its target-date offerings with the launch of the MyCompass Target Date Blend Series, a new collective investment trust (CIT) overseen by Great Gray Trust Company. 

This addition strengthens Voya’s foothold in the growing target-date market, where it already manages more than $25 billion in assets. Sub-advised by flexPATH Strategies, the series benefits from Voya Investment Management’s expertise as a glide path fiduciary, ensuring thoughtful asset allocation. 

Designed to complement Voya’s existing MyCompass Index and MyCompass American Funds solutions, the Blend Series mirrors the firm’s Target Retirement Trust (TRT) framework. Key features include a participant-focused glide path, a mix of active and passive strategies, a multi-manager approach for diversification, and stable value fund allocations to reduce volatility for those nearing retirement. 

Finsum: The finer details such as the glide path can make a huge difference for clients. 

Target-date funds offer a hands-off approach to retirement investing by automatically adjusting asset allocations over time. These funds balance growth and security by shifting from stock-heavy portfolios in early years to safer investments like bonds as retirement nears. 

Named for the investor’s target retirement year, these funds simplify decision-making and are commonly found in employer-sponsored 401(k) plans. A key factor in choosing one is its “glide path,” which determines whether asset adjustments stop at retirement or continue for years beyond. 

While convenient, investors should compare expense ratios and investment strategies to ensure alignment with their risk tolerance. Three TDF funds to consider are: 

1. Vanguard Target Retirement 2045 Fund Investor Shares (VTIVX) – Expense Ratio: 0.08%
2. Fidelity Freedom Index 2045 Fund Investor Class (FIOFX) – Expense Ratio: 0.12%
3. T. Rowe Price Retirement 2045 Fund (TRRKX) – Expense Ratio: 0.62%

Finsum: Despite their “set it and forget it” appeal, periodic reviews help maintain a well-balanced portfolio.

Americans today allocate a larger share of their wealth to the stock market than in previous decades, a shift largely driven by the rise of target date funds (TDFs). These funds, which automatically adjust their asset mix as investors age, have become the default option in many workplace retirement plans since the mid-2000s. 

Research from MIT Sloan suggests that the widespread adoption of TDFs has led younger investors to hold more equities than they might have otherwise. The 2006 Pension Protection Act played a key role in this trend by allowing employers to use TDFs as default retirement investments, increasing participation in equity-heavy portfolios. 

While the impact of TDFs is strongest in the early years of enrollment, many older investors have also gradually shifted toward similar investment strategies. As TDFs continue gaining popularity, they could contribute to market stability by influencing stock price movements and reducing volatility over time.

Finsum: The default 60/40 portfolio is too passive for many young investors and holding larger equity younger, could accelerate their savings.