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Target-Date Q3 Update

By Janet Levaux

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Morningstar-owned Ibbotson Associates says that the average target-date fund lost 1.8% during the third quarter of 2014, while the S&P 500 rose 1.1% and the Barclays U.S. Aggregate Bond Index improved 0.2% during the period.

For the first three quarters of the year, though, target-date funds have improved 9.1%, underperforming the S&P’s 19.7% jump but outperforming the 4% gain in the bond index.

On a 12-month basis, large-cap growth equities top the list of asset classes in terms of performance, Ibbotson says. This group has improved 19.1%. This group is followed by large-cap value equities at 18.9% and real estate at 13.2%.

In terms of flows, target-date funds drew about $11 billion in assets in the third quarter, a level that is “slightly below” the group’s three-year quarterly average of $13 billion, the research firm says.

The largest inflows went to T. Rowe Price with $3.6 billion, followed by Vanguard with $3.2 billion and JPMorgan with about $2 billion in Q3. Meanwhile, Fidelity’s target-date funds had outflows of close to $4 billion.

Overall, retail target-date funds include some $685 billion in assets as of Oct. 30, down $2 billion from June 30. Collectively, Vanguard, Fidelity and T. Rowe Price manage about 70% of these assets, Ibbotson notes.