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Investors Greet Target-Date Funds With Collective Yawn
FYI: The first target-date funds were created in 1994, but after nearly a quarter-century of action they don’t seem to be wowing the investing public. At least that’s the indication of a recent survey of retirees and pre-retirees conducted by Massachusetts Mutual Life Insurance Company. Regards, Ted https://www.fa-mag.com/news/investors-greet-target-date-funds-with-collective-yawn-37952.html?print
I did a quick (maybe not so quick) screen of M*'s target date funds on my brokerage platform (run by Fidelity). Unfiltered: -945 Retirement Date Funds appeared in the first unfiltered screen. Most fund descriptors include a specific year in time (2010 - 2060).
My first screen tried to identify the high barrier to entry funds. There were 180 funds that required more than a $1M minimum initial investment (the highest being $15M). Many of these funds had such small AUM that they appear to be set up for a small handful of high net worth investors who are worried about their retirement. Wish I had their problem.
This group of funds had a variety of descriptors that seemed worth sharing: SmartRetirement (JP Morgan) Balance Risk Retire (Invesco) One Choice (American Century) Lifepath Dynamic or Index or Smart Beta (BlackRock) RealPath (Pimco) Target (Manning & Nappier & Wells Fargo) Retirement (AllianzGI) LifeSmart (Franklin) Multi manager & Multi Index (JHancock)
I then filter for funds with an initial minimum of $2,500 or less: -750 funds appeared
I Filtered for: No Fee / TF (this removed loaded funds - more than half of the above 750 carried loads) -366 funds appeared
I Filter out High ER funds (set ER at 1.0% or lower): -325 funds appeared
I Filter for low ER (set ER at .5% or lower): -105 funds appeared
I Filter for lowest ER (set ER at .3% or lower): -36 funds appeared from four companies: Vanguard, Fidelity, Wells Fargo and Schwab
Returning to the 325 fund choice screen (funds with an ER of 1% or lower)...
I screened for both a high 3 yr Sharpe Ratio and a high 3 year Alpha: -45 funds appeared, with the vast majority of these funds being American Funds. -Also, M* consistently gave many of these American Funds 5* rating over 1,3,5 & 10 yr -American Funds have many share classes options (R6, R5 & F2 seem the cheapest) -Vanguard had 1 fund (Target Income = VTINX). -Fidelity had 1 fund (Fidelity Freedom income = FFFAX)
Finally, I lowered the ER back down to .05% (to capture the lowest ER share classes): -23 funds appeared (21 fund are managed by American Funds and their initial minimum is $250)
Comments
Unfiltered:
-945 Retirement Date Funds appeared in the first unfiltered screen. Most fund descriptors include a specific year in time (2010 - 2060).
My first screen tried to identify the high barrier to entry funds. There were 180 funds that required more than a $1M minimum initial investment (the highest being $15M). Many of these funds had such small AUM that they appear to be set up for a small handful of high net worth investors who are worried about their retirement. Wish I had their problem.
This group of funds had a variety of descriptors that seemed worth sharing:
SmartRetirement (JP Morgan)
Balance Risk Retire (Invesco)
One Choice (American Century)
Lifepath Dynamic or Index or Smart Beta (BlackRock)
RealPath (Pimco)
Target (Manning & Nappier & Wells Fargo)
Retirement (AllianzGI)
LifeSmart (Franklin)
Multi manager & Multi Index (JHancock)
I then filter for funds with an initial minimum of $2,500 or less:
-750 funds appeared
I Filtered for: No Fee / TF (this removed loaded funds - more than half of the above 750 carried loads)
-366 funds appeared
I Filter out High ER funds (set ER at 1.0% or lower):
-325 funds appeared
I Filter for low ER (set ER at .5% or lower):
-105 funds appeared
I Filter for lowest ER (set ER at .3% or lower):
-36 funds appeared from four companies:
Vanguard, Fidelity, Wells Fargo and Schwab
Returning to the 325 fund choice screen (funds with an ER of 1% or lower)...
I screened for both a high 3 yr Sharpe Ratio and a high 3 year Alpha:
-45 funds appeared, with the vast majority of these funds being American Funds.
-Also, M* consistently gave many of these American Funds 5* rating over 1,3,5 & 10 yr
-American Funds have many share classes options (R6, R5 & F2 seem the cheapest)
-Vanguard had 1 fund (Target Income = VTINX).
-Fidelity had 1 fund (Fidelity Freedom income = FFFAX)
Finally, I lowered the ER back down to .05% (to capture the lowest ER share classes):
-23 funds appeared (21 fund are managed by American Funds and their initial minimum is $250)