Target-date and target-risk products grew 5% in 2011 and 8% in the fourth quarter, according to New York-based Strategic Insight. They had a total of $842 billion in assets as of Dec. 31, the group said Wednesday, with target-risk products accounting for $460 billion, or 55%, of assets.
This puts the lifecycle group’s asset growth roughly in line with the uptick of the Dow Jones Industrial Average last year–5.5%. Lifecycle products (including both mutual fund and variable annuities) had net inflows of $11.6 billion in the fourth quarter of 2011.
“Target-date funds continued to grow faster than target-risk funds in the fourth quarter,” said Bridget Bearden, head of lifecycle research at Strategic Insight, in a statement. “Target-risk funds saw net outflows in the last two quarters of 2011, ending the year with modest net outflows.”
Target-date products are those that move into a more conservative portfolio over a specific time horizon, while target-risk products keep a set portfolio style and asset allocation (i.e., aggressive, conservation, etc.)
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Mutual funds made up some two-thirds (or 68%) of overall lifecycle assets, and attracted $7.2 billion during the fourth quarter. The remaining assets (38%) represented variable annuities, which drew $4.5 billion.
Target-date mutual funds returned 6.85% on a weighted average basis over the quarter, and netted $9.1 billion in flows. Target-risk mutual funds returned 6.23%, but they experienced their second consecutive quarter of net outflows, losing $1.9 billion.
Target-date mutual fund assets remained concentrated among the largest fund managers, says Strategic Insight: the five-largest target date mutual fund providers represented 84% of the market in 2011.