Vanguard, T. Rowe Price Biggest Winners in Q1 Target Date Fund Assets: Ibbotson

Drivers of target date fund performance in first quarter were small cap growth, REITs, report shows

Assets flowing into open-end target maturity funds totaled $16.6 billon in the first quarter, a 7% increase over the first quarter of 2010, according to the Ibbotson Target Maturity Report Q1 2011, released Monday. The $17.3 billion in flows recorded during the fourth quarter of 2007 is the only quarter that exceeded the first quarter 2011 result, Ibbotson notes.

Among top-tier mutual fund providers, Ibbotson found that Vanguard had the strongest quarter growing at a 7.2% organic growth rate, while T. Rowe Price also turned in a solid quarter growing at 5%, which was higher than any of the three previous quarters. “Aspiring providers,” Ibbotson said, continued to achieve positive flows, including J.P. Morgan and USAA, with $402 million and $203 million in flows for the quarter, respectively. On the flipside, AllianceBernstein "continued its run of outflows" as it saw $48 million move out during the quarter, Ibbotson found.

As far as specific drivers of performance in the first quarter, “the big winners were small cap growth and REITs”—with small cap growth returning over 9% while REITs returned about 7.5%, Jeremy Stempien, a senior consultant at Ibbotson, and co-author of the report, told AdvisorOne on Monday. Also unique to first quarter performance of target maturity funds was the commodity asset class, he notes. “Target maturity funds that invested in energy-heavy commodities potentially saw a significant boost in their returns.”

Ibbotson says it is now tracking 369 unique target maturity funds with at least a one-year track record representing 45 fund families.

Other highlights from the report include:

  • The average target date fund returned 4.0% for the quarter compared to 5.9% for the S&P 500 and 4.6% for Morningstar’s Lifetime Moderate Index.
  • Assets in collective investment trust (CIT) target maturity strategies continue to gain steam. Total assets in target maturity CITs reached $54 billion at the end of 2010. “These [CIT] vehicles enjoyed $4.8 billion in flows for the quarter, raising AUM by almost $10 billion in the process,” Ibbotson said. BlackRock dominates this space, with $21 billion in AUM for a 39% market share. Vanguard in particular, Ibbotson notes, “has moved a handful of large retirement clients from a mutual fund structure to the CIT structure.”
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