According to a study from ING U.S., 71% of target-date
investors indicated that target-date funds made them feel more confident that
they were making sound investment decisions.
When asked about various features available in target-date
funds, all respondents showed a strong preference for those that are managed by
multiple investment managers and are able to provide a guaranteed income stream
at retirement. More than nine in 10 (93%) target-date investors and nearly
three-quarters (71%) of investors who do not use them would want a target-date
fund that provides stronger protection against market losses in the years
leading up to and including retirement. Additionally, eight in 10 (80%)
respondents using target-date funds and two-thirds (66%) of those not using
them would prefer less market risk at that stage of the investment cycle.
“These findings suggest that diversified, age-adjusted
target-date funds, when effectively designed, may work better than traditional
offerings in bridging the gap between investor knowledge and long-term
retirement objectives,” says Paul Zemsky, chief investment officer of
multi-asset strategies for ING Investment Management.
Some other key findings of the study:
- Eighty-eight percent of target-date investors have
interest in a target-date fund that offers guaranteed income at retirement;
- Eighty-six percent of target-date investors feel confident
they know the definition of “diversification,” compared with a smaller number
(71%) of those who do not use target-date funds; and
- Sixty-one percent of target-date investors prefer
multimanager strategies, while a much smaller number (14%) prefer a single
The findings are from an online survey conducted by Synovate on September 19 and 20, 2011. The 540 respondents were active defined-contribution-plan participants (212 invested in target-date funds, while 328 did not) between ages 25 and 69, and were the primary or joint financial decisionmaker for their acocunt.