Target date funds shouldn’t stand alone, most investors believe

Study also found that some sponsors are lax in scrutinizing such funds

May 29, 2009 @ 1:18 pm

By Sue Asci

Two-thirds of investors believe that target date funds need to be combined with other funds to achieve a proper mix for their retirement portfolios, a white paper released yesterday by Janus Capital Group Inc. of Denver suggests.

Target date funds, which change the allocation to equities and fixed income over time to reach a specific target retirement date, were designed to be a one-stop solution for retirement savings.

The study also found that some plan sponsors did not apply the same level of due diligence to target date funds as other funds.

While 60% of plan sponsors said they evaluated individual target date funds and their underlying holdings when selecting a series of funds, 40% said they did not.

Of employees surveyed who were giving an array of choices, 49% got information from the planís record keeper, 29% conducted independent research, and 23% got information from their employer.

Janus, which does not currently offer target date funds, conducted the research as part of an initiative to study retirement needs of investors, the firm said.

The fund firm had $110.9 billion in assets under management as of March 31.

The analysis reflected the results of two surveys. In October, Brightwork Partners LLC in Stamford, Conn., conducted an online survey of 503 employees who were contributing to their 401(k) plans and held one or more target date funds in their account.

A second e-mail survey involved 6,123 respondents that were defined contribution plan sponsors.

The survey was conducted July to September in conjunction with Plansponser magazine, owned by Asset International Inc., also of Stamford.

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