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April 03, 2014 at 02:27 PM
The Securities and Exchange Commission said Thursday that it is seeking comment on a recommendation by its Investor Advisory Committee that it develop a target-date glide path illustration based on a standardized measure of fund risk.
In 2010, the SEC proposed new requirements for the marketing of target-date funds, including a requirement to present a “graphical or tabular depiction of changes in the fund’s asset allocation over time,” or its glide path.
The SEC said Thursday that it is also reopening that proposal for comment in order to seek feedback on glide path illustrations.
“I greatly appreciate the input of the Investor Advisory Committee on this important matter and I look forward to carefully considering comments received on the committee’s recommendation,” said SEC Chair Mary Jo White.
The Investor Advisory Committee told the SEC in its recommendation, issued in April 2013, that the “dramatic drop in value in 2008 of some target-date funds that were close to reaching their advertised target date brought new attention to the significant differences in risk levels that exist among funds with identical target dates.”
Target-date funds typically start out heavily invested in equities and tilt toward bonds and cash as the target retirement date nears. But there is wide variation in asset allocations among funds. After the market crashed in 2008, some 2010-dated funds still had more than 60% of their assets in equities, devastating soon-to-be retirees at a time when they could ill afford it.
Some funds are intended to build savings up to the target date and keep a flat, conservative allocation thereafter to reduce risk — a to glide path — while others, intended to help investors save through retirement, have a larger equity allocation at the target date and become more conservative more gradually.
