Over two-thirds of investors with assets in target-date funds feel more secure about their retirement than those who are not invested in TDFs, a report released Tuesday by ING U.S. found, and nearly three-quarters say they are confident that they’re making good investment decisions.
At the end of December 2011, TDF assets totaled $381 billion, according to Strategic Insight. McKinsey & Co. projected in 2010 that by 2015, TDFs would account for between 35% and 40% of all DC plan assets.
The report, “Participant Preferences in Target-Date Funds: Examining Perceptions and Expectations Among Target-Date Users and Non-Users,” found 80% of TDF investors say they want funds that provide better protection against investment losses in the years immediately prior to and during retirement. Two-thirds of investors who did not have a TDF agreed. Among non-users, 15% say they prefer investments with a strong potential for gain, but 19% reported no preference.
TDF users and nonusers alike expressed an interest in funds that offered guaranteed income options. Eighty-eight percent of TDF users and 68% of nonusers expressed an interest in products with such features.
Respondents were almost equally interested in funds that offer exposure to multiple asset classes and those that utilize multiple managers. “Given this participant preference for diversification, it’s important for plan sponsors to determine that their target-date offering, which is designed to be a comprehensive single-portfolio solution, actually provides adequate diversification,” according to the report.
The survey also endeavored to determine how well participants understand target-date funds. The survey found just over half of TDF users understood that their asset allocation would become more conservative over time and 36% knew what a glide path was. “Retirement professionals should keep in mind that while target-date funds have been widely examined within the investment community, participants are not as well-versed in the features and benefits of TDFs,” according to the report.