Target date funds, already the subject of controversy for failing to deliver promised returns, took another turn for the worse in 2011.
In a review of the product’s overall performance by SmartMoney, the periodical found that the average fund with four years to go until its target date declined 0.4% in 2011. This compares with a 2% gain for the S&P 500 and an 8% gain for the Barclays Capital Aggregate Bond Index.
An out-growth of the 2006 Pension Protection Act, target date funds have become popular in 401(k) and other pension plans as a default option for many investors. But they became a target of ire with regulators and politicians in the wake of the 2008 market crash, most notably for their heavy allocation to equities, something that SmartMoney says has not changed.