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June 24, 2014 at 02:09 PM
Target-date funds are the overwhelming favorite among participants in professionally managed investments, a report released Tuesday by Vanguard found.
An analysis of Vanguard’s small and midsize retirement plan participants found more than two-thirds said were invested in at least one target-date fund. By comparison, 4% of participants are using a risk-based balanced fund, and 2% are invested in a managed account or model portfolio.
Overall, professionally managed investment options are helping participants maintain well-diversified retirement plans, Vanguard found.
The study, “Vanguard Retirement Plan Access 2014,” found 76% of workers in small businesses who participate in their workplace retirement plan have well-diversified accounts. Of those, more than half are invested in a professionally managed option.
Vanguard analyzed 2013 year-end data from 60,000 participants in more than 1,400 small plans served through Vanguard Retirement Plan Access (RPA), the firm’s solution for small and midsize plans.
The report noted that many of those investors are using professionally managed options like target-date funds, balanced funds or model portfolios because their employers put them there. When Vanguard launched RPA in 2011, two-thirds of plan sponsors re-enrolled participants in those products as the default.
