Do target date mutual funds meet their targets?

Johnson, William F.; Yi, Ha Chin

doi:10.1057/s41260-017-0054-7

Cited by 3 publications

(2 citation statements)

References 20 publications

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“…Risk matching due to targeting different clienteles is not significant in explaining the return and allocation heterogeneity among funds with the same target retirement year. Within a different framework, Johnson & Yi (2017) use Sharpe and Treynor ratios to explore the performance of target date funds relative to a balanced fund. Their analysis is specific to funds with target years 2035-2050 and they find that TDFs do not outperform naïve strategies.…”

Section: Related Literaturementioning

confidence: 99%

Performance dispersion among target date funds

Pavlova,

Hibbert

2024

J Asset Manag

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There are significant differences in the performance of Target Date Funds (TDFs) with the same target year. Using a unique dataset from Morningstar, we show that within the same target year, funds with lower than the average expense ratio, or higher than average allocation to equities, outperform similar funds. This outperformance exists across all target year groups and is economically meaningful. Furthermore, deviations in the equity allocation have a greater impact on performance than does expense ratio. Using bootstrap simulations to investigate the impact over a longer horizon, we show that deviations from the average allocations or expense ratios have a meaningful impact on the retirement savings of an average investor.

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Section: Related Literaturementioning

confidence: 99%

Performance dispersion among target date funds

Pavlova,

Hibbert

2024

J Asset Manag

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“…Due to this ambiguity, typical implementations of TDF strategies are often based on heuristics that are lacking consistency and optimality under a well-defined quantitative model. These often lead to inappropriate exposure to market risks for TDFs of different target dates and mixed investment outcomes, see Yoon (2010), Johnson and Yi (2017). To properly design the so-called "glide path" for the TDF, proper characterization of market risks and returns at different time horizons is essential, see Yoon (2010).…”

Section: Introductionmentioning

confidence: 99%

Dynamic Asset Allocation for Target Date Funds Under the Benchmark Approach

Sun¹,

Zhu²,

Platen³

2021

ASTIN Bull.

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Target date funds (TDFs) are becoming increasingly popular investment choices among investors with long-term prospects. Examples include members of superannuation funds seeking to save for retirement at a given age. TDFs provide efficient risk exposures to a diversified range of asset classes that dynamically match the risk profile of the investment payoff as the investors age. This is often achieved by making increasingly conservative asset allocations over time as the retirement date approaches. Such dynamically evolving allocation strategies for TDFs are often referred to as glide paths. We propose a systematic approach to the design of optimal TDF glide paths implied by retirement dates and risk preferences and construct the corresponding dynamic asset allocation strategy that delivers the optimal payoffs at minimal costs. The TDF strategies we propose are dynamic portfolios consisting of units of the growth-optimal portfolio (GP) and the risk-free asset. Here, the GP is often approximated by a well-diversified index of multiple risky assets. We backtest the TDF strategies with the historical returns of the S&P500 total return index serving as the GP approximation.

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Variables Impacting Mutual Fund Expense Ratio: The Indian Midcap Mutual Fund Experience

2021

cibg

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Do target date mutual funds meet their targets?

Cited by 3 publications

References 20 publications

Performance dispersion among target date funds

Performance dispersion among target date funds

Dynamic Asset Allocation for Target Date Funds Under the Benchmark Approach

Variables Impacting Mutual Fund Expense Ratio: The Indian Midcap Mutual Fund Experience

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