A quantitative analytical series looking at one of the most popular retirement investing fund segments in the market.
Morningstar’s 2017 Target Date Landscape Report indicates that approximately one quarter of TDF series shifted the target equity allocation of at least one vintage by 15% or more over the last 5 years and nearly half by at least 5%.
Four of the other five fund families with holdings vs. returns-based discrepancies are of a similar nature in that they have investments in derivatives, leveraged funds or absolute return funds, which affect the holdings tally. In each of these cases, DSA provides a much closer estimate to the intended systematic exposure.
We demonstrate the advantages of using returns-based analysis in determining the effective glide-paths of Target-Date Funds vs. the stated ones
We illustrate how such an event such as “Brexit” could be (a) used as a litmus test to reconcile TDF information with performance results; and (b) alert to suitability of the selected investment option.