Target date fund returns rebounded in 2009

Target-date funds in Ibbotson Associates' research universe returned an average of 27.1% in 2009, compared to a 30.8% loss in the previous year. “As the market goes, so goes the target-date funds,” Thomas Idzorek, Ibbotson chief investment officer and director of research, said in an interview. Among asset classes in the target-date universe tracked by Ibbotson, emerging market equity returned 79% — a gain Mr. Idzorek called “eye-popping” — while high-yield bonds gained 58.2%. Domestic large-cap growth equity gained 37.2%, while U.S. large-cap value equity rose 19.7%. TIPS returned 11.4%. The Ibbotson report noted that fund inflows to target-date funds improved “significantly” in the fourth quarter, adding $13.9 billion compared to the $11 billion in inflows for the third quarter. “Thanks to the stock market's recovery as well as new investments,” assets in target-date funds grew from $159 billion by the end of 2008 to $256.5 billion by the end of 2009, the Ibbotson report said. Ibbotson, a subsidiary of Morningstar, included target-date funds that had at least 12 months of operation for its analysis in the respective years, 264 in 2008 and 322 last year. Mr. Steyer is a reporter at Pensions & Investments, a sister publication to InvestmentNews.