The average target maturity fund had a positive return for the fourth straight quarter of 3.8%, slightly below the 4.0% return during the fourth quarter of 2009, and the 5.4% return of the S&P 500 Index in the first quarter. The Morningstar Lifetime Moderate Index family returned 3.4% for the quarter.
These funds have produced average annual returns of 5.5% over tha past few years.
The five-year performance of moderate target-date funds, by target year, are as follows:
- 2010: 5.5%
- 2020: 5.4%
- 2030: 5.1%
- 2040: 5.1%
- 2050: 5.31%.
Morningstar gives a top rating to the following target-date fund families through December 31, 2009: American Century, American Funds, T. Rowe Price and Vanguard. Its above-average rating goes to JP Morgan, Vantagepoint and Wells Fargo.
In terms of fund flows, target-maturity fund flows increased 11% from the fourth quarter 2009, “and were a stunning 55% higher than the flows of the first quarter 2009,” according to the report.
“This product category’s ability to maintain its stellar quarterly growth rate is all the more impressive considering assets have climbed steeply in each successive quarter since first quarter of 2009 due to both flows and market appreciation,” explained authors Tom Idzorek and Jeremy Stempien.
If target maturity were a single Morningstar category, it would rank as the seventh largest, they say. And if target maturity funds maintain their current growth rates, they could collectively surpass $350 billion in assets within a year.