News and Finance

Target-date funds did better than balanced mutual funds in retirement plans and continue to attract investments, Morningstar, the Chicago-based equity market researcher, said last week.

Target-date retirement funds, also known as lifecycle funds, move money from riskier investments such as stocks to more conservative alternatives such as bonds as an investor approaches retirement.

Legislators have scrutinized the funds’ fees, disclosure and risk structure after some lost as much as 41 percent in 2008, according to Morningstar, while the Standard & Poor’s 500 Index dropped 38 percent. Several target-date providers have cut shareholder fees and made their asset allocations more conservative as a result, Morningstar said.

The typical investor in a target-date fund with an expected retirement date from 2031 to 2035 lost 1.93 percent over the past three years in a target-date fund, while an investor in a balanced fund, comprising 60 percent stocks and 40 percent bonds, lost 2 payday loans online.77 percent in the same period, according to Morningstar.

Fidelity Investments based in Boston, T. Rowe Price Group Inc. based in Baltimore, and Vanguard Group Inc. based in Valley Forge, Penn., are the three largest target-date providers by assets. They control more than two-thirds of the target-date assets.

The top-rated target-date providers based on returns, fees and management as of December were Capital Research & Management Co.’s American Funds based in Los Angeles, American Century Investment Services Inc. based in Kansas City, T. Rowe Price and Vanguard.

Source