Morningstar has issued a series of target-date ratings and reports with data through the second quarter of 2010 for 20 of the largest target-date series in the industry.
With more than $270 billion in assets as of June 30, “target-date funds are quickly becoming the primary retirement savings vehicle for many 401(k) participants,” the fund research group said in a statement.
The reports note that portfolio managers of several series made changes designed to limit the volatility of returns. Some managers of series offered by Oppenheimer, T. Rowe Price, Principal, and ING introduced stakes in alternative assets; AllianceBernstein began using a quantitative model to forecast equity-market volatility so management can move some assets to cash.
The Morningstar data shows that the industry average-expense ratio declined to 0.88% from 0.91% a year earlier for those target-date series that are at least 18 months old.
Morningstar analysts noted that:
– Over the trailing three-year period, the American Century Livestrong series was “one of the stronger performers in the target-date world, with most of its funds ranking in their respective categories’ top decile.” The series’ relatively conservative asset allocation gave it a boost during the ’08 downturn and the first half of ’10, but as expected, weighed on its relative performance during ’09′s market rally.