Target date funds are increasing in popularity, and they’re also serving customers better, according to a new report from Brightscope/Target Data Analytics. 

The funds, which invest in a mix of assets and aim to reduce equity exposure as a client nears retirement, have become common as auto-enrollment options themselves becoming increasingly popular among workplace plans. Vangaurd reported that 79 percent of the plans it administered offered TDFs last year, up from just 13 percent in 2004. 

Despite this surge in popularity, the plans have suffered from two distinct drawbacks: steep fees and maintaining levels of equity exposure too high for older investors. 

Fund adminstrators have moved to address these concerns by taking a more conservative approach to asset allocation, including naming the year targeted for the lowest equity exposure in the fund series name, so investors know just what they are getting.

The fee issue has also been addressed; while institutional funds had average expense ratios of 75 basis points, Vanguard has introduced TDFs with just 18 basis points, prompting other administrators to follow suit.

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