Commentary

Is your "index" target date fund performing like its index?

Key considerations for establishing an index target date fund's composite benchmark and for managing the index TDF portfolio.

By: Andrew Dierdorf Finola McGuire Foley Brett Sumsion

Updated: 11/15/2022

Key Takeaways

Investors in an index target date fund (TDF) should expect performance that closely tracks a composite benchmark representing the fund’s strategic asset allocation.
Our review of realized performance among several prominent index TDFs shows that some managers have delivered on this expectation more effectively than others.
In our view, managers have realized disparate outcomes primarily because of differences in implementation processes, capabilities, and skill.
The implementation process for a TDF includes two key components that require investment insights and skill: (1) establishing a composite benchmark and (2) management of the portfolio.

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Is your "index" target date fund performing like its index?

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