Despite a 3% improvement in fourth quarter results, target date funds posted a decline of 0.86% for 2015 — their first such yearly loss since 2008, according to Callan Associates, the developer of the Callan Target Date Index.
“After the carnage of 2008, when the median target date fund lost 26.41%, target date fund managers generally decreased their glide path allocations to equities and improved their overall diversification,” said Lori Lucas, head of Callan’s Defined Contribution practice, in a statement.
The range of performance within the category appears to be narrowing, the investment consulting firm says.
In 2008, the range between the best- and worst-performing target date funds was more than 22 percentage points. The range differed by fewer than two percentage points in 2015, according to Callan.
In the fourth quarter, target date funds benefited from domestic equity exposure; the S&P 500 gained 7% in the period. Bonds, however, dropped roughly 0.6% as measured by the Barclays U.S. Aggregate Index.
According to Callan, its target date index includes 44 target date fund series, including both mutual funds and collective trusts.