Morningstar reported Monday that target-date mutual fund assets passed the $1 trillion threshold in 2017 after amassing a record $70 billion in estimated net flows during the year.

The funds have experienced more than $40 billion in net flows each year since 2008, when assets in target date funds stood at $158 billion, according to the report.

“Even more remarkable than the funds’ strong growth, though, was seeing the heightened demand for low-cost, passive target-date series,” Jeff Holt, director of Morningstar’s multi-asset and alternative strategies team, said in a statement.

Holt noted that in 2017, nearly 95% of the $70 billion in estimated net flows to target-date funds went into series that invest predominantly in index funds, likely driven by retirement plan sponsors’ demand for low costs.

This was a sizable increase from two-thirds in 2016, he said.

The report found that target-date funds’ average asset-weighted expense ratio fell to 0.66% at the end of 2017, down from 0.91% five years ago.

Lower fees are part of a multiyear downward trend in the mutual fund sector. Recent research showed that between 1996 and 2017, investors paid 43% less on average for equity, hybrid and bond mutual funds, including both actively managed and index mutual funds in those asset classes.

According to the Morningstar report, although new lower-cost series rolled out by target-date providers to meet demand have generally been the most popular, not all have produced better performance results than older, costlier ones.

U.S. large-cap stocks — generally the top performers in recent years — easily outpaced typically more diversified target-date fund portfolios over the past five years through December 2017.

Morningstar said that when evaluating performance, it was important to keep in mind that target-date funds provide a diversified portfolio that considers an investor’s age in setting asset allocation and balancing risks.

The report said portfolios for different passive target-date series may diverge significantly, even more so than active series from a sub-asset-class glide path perspective.

Whereas active and passive series generally have similar average equity glide paths, the average sub-asset-class exposures show more diversified bond exposures in active series than passive ones.

“Target-date investors clearly stand to benefit from lower costs, but it is critical that those selecting target-date funds — retirement plan sponsors or investors — know what’s behind the price tag,” Holt said.

“Looking at sub-asset class exposures reveals meaningful differences between target-date series, even between ones considered passive, and those differences affect performance results more than fees.”

Morningstar said its analysts rate target date series by evaluating five key pillars and assign the ratings on a five-tier scale of gold, silver, bronze, neutral and negative.

In March, the firm assigned new analyst ratings to nine U.S. funds, upgraded and downgraded several others and placed 10 funds’ ratings under review.

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