Diving into the Issues that Shape Fidelity Target Date Funds

Insights and intelligence for retirement leaders.

Diving into the Issues that Shape Fidelity Target Date Funds

Insights and intelligence for retirement leaders.

Why Our Strategies

Fidelity's target date strategies offer participants and plan sponsors an integrated experience that draws on Fidelity's retirement expertise, a durable and time-tested investment process, as well as guidance and communications resources that help encourage disciplined savings—delivering superior value to clients.

Latest Target Date Perspectives—Fulcrum Issues

Fulcrum Issues serves as a forum for Fidelity's Target Date Team to highlight topics that we believe are important for multi-asset class investors to consider when making investment decisions. In our most recent installment of Fulcrum Issues, we explore one of the core issues investors are grappling with today: The trajectory of short-term interest rates and whether monetary policy has reached an inflection point.

Are we there yet? Monetary policy, investor expectations, and relative return opportunities

Investors across the globe have been focused on figuring out when central banks will pivot from inflation-combating rate hikes to growth-boosting rate cuts. But have come to very different conclusions: Our analysis of investor expectations as revealed by short-term interest rates suggests substantial gaps in expectations across asset classes, which presents a compelling relative investment opportunity.

Rate expectations: Charting the cycle

  • While rate expectations have moved lower over time, there have been cycles around them—when moving higher, expectations are moving closer to an inflection point.
  • Our proprietary measure of investor expectations for rest rate policy as derived from the eurodollar futures market suggests we are moving closer to an inflection point, particularly when compared to history—asset classes appear to embed disparate views, suggesting opportunity.
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Will this trend continue?

Real productivity growth vs. real profit growth

Nov 2000Dec 2007Mar 2023Nov 1990Less Late-CycleMore Late-Cycle0.50-0.5-1-1.5-2-2.5-3-3.5Oct-87Oct-92Oct-97Oct-02Oct-07Oct-12Oct-17Oct-22

Read Prior Fulcrum Issues

Defining and Selecting Strategic Asset Exposures for Target Date Investors

Fidelity's target date strategies provide diversification by asset class and market environment and focus on participants' needs and sensitivities.

  • Fidelity's strategic allocation process emphasizes long-term return, independent and unique diversification attributes, and durable implementation characteristics.
  • Our research frameworks provide insight into how asset classes behave during distinct market regimes and in response to a common set of risk factors.
  • Concerns over higher global debt and lower GDP growth reinforce the need for diversification across market regimes.
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Our proprietary regimes' framework identifies five distinct market environments, relevant risk scenarios, and opportunities to improve portfolio diversification

Five Historical Market Regimes, 1950–2019

1950195319561959196219651968197119741977198019831986198919921995199820012004200720102013201620190%10%20%30%40%50%60%70%80%90%100%Low Volatility with Falling RatesLow Volatility with Rising RatesDeflationary StressInflationary StressRecovery

Fidelity's Target Date Glide Path: A Research-Driven Approach

Throughout participants' evolving time horizons, the glide path is a primary driver of outcomes and reflects an investment manager?s beliefs about strategic asset allocation, including asset class selection and trade-offs between risk and return.

  • Our unique insights on retirement goals and savings behaviors of target date participants are central to understanding their individual needs and risk tolerance.
  • The investment research that supports the glide path considers historical and forward-looking perspectives on capital markets.
  • We evaluate and synthesize research from multiple analytical frameworks to assess and balance the impact of various risks on retirement outcomes.
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The glide path investment process combines insights on investor needs and risk tolerance with capital market views.

InvestorNeeds andBehaviorsCapitalMarketViewsGlide PathInvestor characteristics (e.g.,savings rates, account balances, planning horizon)Long-term attributes of asset classesAnalysis ofreturns in marketenvironments, states, and cyclesForward-lookingdrivers and catalystsof asset pricesRetirementincome goalsTime horizon andrisk tolerance

Is Your "Index" Target Date Fund Performing Like Its Index?

Investors in an index target date fund (TDF) should expect performance that closely tracks a composite benchmark that represents 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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Not all index target date funds track their benchmarks in similar fashion.

Aug 2017 Aug 2018Aug 2019Aug 2020Aug 2021Aug 2022-1.4-1.2-1-0.8-0.6-0.4- AManager BManager C

Why Fidelity Target Date Strategies Could Be the Right Fit

Learn about key criteria to help you evaluate providers and how Fidelity measures up.

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