The Benefits of Improving TDF Transparency

A recent white paper examined how improved transparency with target-date funds would help retirement plan fiduciaries better understand the funds’ holdings.

“Raising the Bar on Target Date Due Diligence,” a collaboration between Manning & Napier, an investment management firm, and Strategic Insight, an Asset International company that provides clients with mutual fund industry research and business intelligence, found that, despite the rapid adoption of target-date funds (TDFs) by plans and the responsibilities in monitoring such funds, many fiduciaries admitted that they were still unclear on what their target-date funds really hold. According to the paper, this uncertainty comes from a lack of complete and comparable disclosure among the funds.

The paper recommended that fiduciaries should question whether the underlying securities of target-date funds are appropriate to meet the retirement saving needs of plan participants. While the paper acknowledged that examining funds in such detail is a challenge, regardless of this complexity, investment option due diligence is a fiduciary responsibility that must be carried out to ensure that assets are managed prudently for the benefit of the plan participants.

In terms of the transparency of target-date portfolio construction, the paper examined:


  • Qualified default investment alternatives (QDIAs);
  • Investment selection and monitoring;
  • Core fund selection screening criteria;
  • Guidance on screening and monitoring from the Department of Labor (DOL); and
  • Comprehensive target date screening criteria.


With regard to target date due diligence for fiduciaries, the paper looked at three key considerations, which included asking if the target-date fund was transparent or translucent—i.e., whether the underlying holdings for each target-date fund are revealed—if all levels of portfolio management coordinate, and whether the target-date fund is overdiversified.

The paper concluded that full transparency on the underlying investments in a target-date fund should allow plan sponsors and advisers to better perform their fiduciary duties of due diligence on target-date funds at a level similar to that of more traditional core funds on the investment menu.

The full white paper can be found here.