Target-Date Solutions Reach $1.77 Trillion in Assets

CIT-based solutions grew, while mutual fund-based solutions declined in 2018, according to Sway Research.

Mutual fund and collective investment trust (CIT) target-date solutions reached $1.77 trillion in assets at the end of 2018, a modest 1.1% increase from $1.75 trillion the year before, according to Sway Research.

CIT-based solutions began the year with $638 billion and grew by 6.1% to reach $677 billion. Mutual fund-based solutions, on the other hand, declined by 1.9%, from $1.11 trillion to $1.09 trillion. Sway attributes this to the poor stock market returns in 2018 and ongoing movement among plan sponsors away from higher-cost mutual fund target-date solutions to lower-cost CITs.

Target-date series that invest in passively managed underlying funds reached 53.3% of target-date solutions, up from 51.2% in 2017 and 47.0% in 2015. Target-date series that invest in actively managed underlying funds saw their market share fall to 38.0%, down from 41.7% in 2017 and 46.1% in 2015. Hybrid target-date series that invest in both actively and passively managed funds saw their market share rise to 8.6%, up from 7.2% the year prior and 7.0% in 2015.

While some believe a down market is needed to stem the tide of assets flowing from actively managed funds to passively-managed ones, negative stock market returns in 2018 (the S&P 500 Index was down 4.4%) did not improve the attractiveness of target-date mutual fund series that invest in actively-managed underlying funds. “Active” target-date funds ended 2018 with lower asset-weighted returns than passive target-dates funds for 1-, 3-, and 5-years. This is a reversal from the end of 2017, when actively-managed target-date series finished with higher returns for the same periods. Sway says managers of actively-managed series need to outperform in down markets for their products to remain attractive when compared to lower-cost passively-managed competitors.


Sway’s annual in-depth study of the target-date market is based on a proprietary database of mutual fund and CIT target-date portfolio and asset data, which includes 150 different target-date series spread across nearly 6,000 individual mutual fund share classes and CITs.

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