Nearly a third of net new assets in firms with target-date funds in 2013 came from TDF inflows, according to Morningstar’s 2014 target-date series research paper released on Tuesday.
For T. Rowe Price, it’s even more. More than 90% of the firm’s total $8.5 billion in net new mutual fund assets in 2013 were gained from its target-date series’ $8.1 billion in net new assets (excluding money market flows). Roughly half of Fidelity’s new assets came from TDFs.
Even for firms with smaller target-date series, like J.P. Morgan and American Funds, TDFs made up a significant portion of their parent firms’ sources of new assets.
“J.P. Morgan’s $7.4 billion in new target-date assets, for instance, represented more than a third of the firm’s net new assets in 2013,” the study said. “American Funds’ $2.3 billion in net new target-date assets helped soften the impact from the firm’s overall $13.0 billion in outflows that year.”
What Your Peers Are Reading
The target-date market overall saw a rise in net flows, with a 10.5% organic growth rate in 2013. The study reported 20 of 36 target-date mutual fund firms with growth rates greater than the overall industry’s. According to the annual study, target-date mutual funds held more than $650 billion in assets as of March 31, thanks to the more than $50 billion in new flows in 2013 and combined with an additional $18 billion in new assets in 2014’s first quarter plus market appreciation.
“Those figures underscore not only how ubiquitous target-date funds have become to individuals saving for retirement, but also their central role to many fund companies’ business prospects,” wrote Janet Yang, Morningstar’s target-date series strategist and lead author of the study, in her report summary. “With echo boomers — a group often anecdotally noted for embracing the set-it-and-forget-it nature of target-date funds — beginning to enter their peak earning period, investors and industry watchers should expect those numbers to continue growing in the years to come.”