Target-date funds returned 5.3% for the quarter, slightly better than the S&P 500’s 5.2%, according to the latest report issued by Morningstar-owned Ibbotson Associates. Plus, the funds are up “a respectable 12.3% for the 12-month period ending in September, driven by the strong performance of equities in developed countries,” Ibbotson analysts say.
Still, estimated flows into target-date mutual funds were only $1.5 billion for the quarter. This is the lowest figure in more than a decade, explain Jeremy Stempien and Cindy Galiano, who wrote the target-date report. “The transition of some retirement plans from mutual funds to a collective investment trust (CIT) structure may have contributed to the muted flows,” they note.
In the past 10 years, quarterly inflows into target-date funds have averaged $10 billion. This figure was about $13 billion per quarter over the past three years, the research group says.
As of Sept. 30, assets in target-maturity funds were about $577 billion, a 24% increase from a year ago.
As for their Q3 performance, target-date funds outperformed both U.S. large-cap stocks and bonds, which rose 5.2% and 0.6%, respectively, Ibbotson says. In the prior quarter, target-date funds didn’t keep up with S&P 500 and declined 0.6% on average.