Target-date funds struggled to recover from volatility left over from a “very tough third quarter,” according to the Ibbotson Target Maturity Report, released Monday. Recovering equity markets proved to be a boon for target maturity funds due to their mix of multiple asset classes, though they did end the year slightly down.

Among the 386 funds covered in the report, the average return in the fourth quarter was 6.8%, after losing 11.8% in the third quarter. Funds closer to their target retirement date tended to outperform those further out from retirement.

Non-U.S. equity and commodities dragged funds down, returning 3.4% and 0.3% respectively. Domestic small-cap equities were strong performers, followed by large-cap equity. Real estate returned 15.3%.

“The fourth-quarter asset class performance saw a sharp reversal of the third quarter’s poor returns in equities and most higher-risk assets,” according to the report. “Non-U.S. equities, both developed and emerging, once again struggled on a relative basis, but posted positive returns during the quarter. These asset classes continue to be weighed down by fiscal issues in the eurozone along with a strengthening U.S. dollar.”

For the full year, the average fund lost 1.6%. “The full year 2011 was marked by a string of debt crises, natural disasters, and political uncertainties that all led to higher volatility,” according to the report.

Ibbotson also noted that while funds allocated to TIPS generally fared well, some suffered for their exposure to commodities. “As one might imagine, the poor performance of non-U.S. asset classes hurt the performance of target maturity funds with the largest foreign exposures during the past year. Funds with significant allocations to TIPS were some of the better performers, although some of the funds with high TIPS exposure also had high exposure to commodities.”

Target maturity funds took in almost $10 billion in inflows, increasing 53% from the third quarter. The 2011-2015 and 2016-2020 categories increased over 200%, with Fidelity, Vanguard and T. Rowe Price dominating the retail space. Total assets increased as well, jumping 9.5% in the fourth quarter following a 10% decline in the third quarter.