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August 10, 2013 at 01:50 PM
Target-date funds aren’t keeping up with S&P 500, though they are staying ahead of a key fixed-income benchmark, according to the latest data released by Ibbotson on Wednesday.
“Despite volatile markets, target maturity fund returns for the quarter fell squarely in between equity and bond returns. For the 12-month period ending in June, target maturity funds earned a respectable 11.9%, driven by the strong performance of U.S. equities,” wrote Jeremy Stempien and Cindy Galliano, both directors of investments for Ibbotson (a unit of Morningstar) in the Q2 report.
In the second quarter, target-date funds declined 0.6% on average.
As the experts note, these figures put target-date funds behind the 2.9% Q2 results and 20.6% 12-month returns of the S&P 500; however, they outpaced the Barclays U.S. Aggregate Bond Index, which declined 2.3% in Q2 and 0.7% in the past 12-month period.
Target-date funds with exposure to commodities, Treasury inflation-protected securities and emerging-market equities underperformed other funds in the group over the past year, according to Ibbotson. These assets classes have been “struggling,” with losses of between 7 and 10% in the quarter, the research firm notes.
Fund Flows Moderate
As for fund flows, assets moving into target-date funds in Q2 returned to “normal levels” of $12 billion, after a record-breaking positive flow of $23 billion in the first quarter. At end of the second quarter, total assets in target-date funds totaled an estimated $545 billion, representing a 27% increase from a year ago.
