Target Date Funds by Marc Odo, CFA, CAIA, CFP

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Mon, 2010-04-05

Over the past several years the popularity of target date funds for use in retirement plans has exploded.  Their attractiveness is obvious:  faced with an overwhelming number of investment options in a self-directed 401(k) plan, an unsophisticated investor can instead direct all of his or her contributions to a single, well-diversified mutual fund.  While target date, lifestyle, or glide path funds have made investing easy for the plan participant, the irony is their introduction has made life harder, in some ways, for the fiduciaries whose job it is to analyze such investments.  This study seeks to shed some light on the situation and propose thoughtful, meaningful ways of analyzing such balanced funds.  We will argue that Bill Sharpe’s returns-based style analysis methodology is ideally suited for analyzing target date funds.


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