Target-Dates Losing Image as Best QDIA

A recent survey revealed that plan sponsor perceptions of target-date funds, as compared to other QDIA options, are shifting.

The survey by Janus Capital Group, in conjunction with Asset International, found an increasing number of sponsors indicate they believe balanced funds and target-risk funds are the best QDIAs for their employee populations. Just 34% of respondents said target-date funds are the best QDIA for their plan, down from 57% last year.   

In addition, when asked to compare QDIA options based on fees, transparency, overall performance, risk management, and correct usage by participants, balanced funds saw gains each category compared to last year, while target-date funds saw declines. Thirty-five percent of plans (compared to 29% last year) are not sure what the best QDIA option is for their employee population.  

The survey also revealed a broad gap between plans’ utilization and understanding of target-date funds.  Despite the increasing number of DC plans offering target-date funds, a significant percentage of sponsors are still unclear about many aspects of the target-date funds within their investment menus.   

Compared to 2009 findings, more plans don’t know what the end date of the glide path is in their target-date funds (50% compared to 32% last year). More than one-third of all plans are not familiar with the “to” or “through” glide path dilemma.   

“The findings reveal a disconnect as respondents believe they’re less than well informed about their chosen target-date offerings, but remain confident their employees understand the products and use them correctly. This confirms an opportunity exists to provide plan sponsors with education about the structures and mechanics of target-date funds,” said Russ Shipman, senior vice president and managing director of Janus’ Retirement Strategy Group, in a press release.