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Target-Date Mutual Funds Continue Gains, Ibbotson Reports

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As target-date funds increase in popularity with investors, Ibbotson Associates said these funds experienced their fourth consecutive quarter of positive gains during the first quarter of 2010.

Of the 332 funds Ibbotson monitored with at least a one-year track record included in the study, the average increase was 3.8% for the quarter, which was down from the fourth quarter’s 4% return. Over a period of 12 months, the funds rose 43%.

Tom Idzorek, chief investment officer and director of research at Ibbotson, said in a statement that the funds were boosted by surging markets and gains in most asset classes.

The best performers for the period included U.S. small-cap-value equity and real estate, which both saw a return of 10%. In fixed-income categories, high-yield bonds led the way with a 4.6% return for the period. Over the past 12 months, real estate experienced returns of 107%, followed by emerging-markets equity, with a return of 82%.

Emphasizing the importance of target-date funds to investors, a recent study by Vanguard showed that its defined contribution (DC) plans offering target-date funds increased from 13% of plans in 2004, to 75% in 2009.

Jean Young, a researcher at the Vanguard Center for Retirement Research and co-author of the report, said in a statement, “This level of support indicates the funds’ importance to the future of retirement savings and runs counter to the views of some critics that they are not suitable investment options.”

Read a story on Roger Ibbotson’s speech on investing during the Morningstar Ibbotson Asset Allocation conference from the archives of