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Where it all began

Target date funds (TDFs) are a staple within the retirement industry.  But comparatively to the asset management universe, they are a relatively new phenomenon.  So, when did TDFs begin?

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By Clayton Fresk on October 1, 2019



Target date funds (TDFs) are a staple within the retirement industry.  But comparatively to the asset management universe, they are a relatively new phenomenon.  So, when did TDFs begin?

 

The first publicly available TDF was issued by Wells Fargo in early 1994.  While still in existence today (albeit with various changes), these “StageCoach LifePath Funds” were advertised as a new breed of more traditional asset allocation funds targeted towards baby boomers1:

 

The Lifepath funds will be managed by Wells Fargo Nikko Investment Advisers, owned jointly by the bank and Nikko Securities of Japan.

 

While Wells Nikko has a successful 10-year track record for its traditional asset allocation fund, the Lifepath funds are more ambitious than any of its previous offerings. Instead of switching money between 3 categories — stocks, bonds and cash — the new funds have 14 categories: 6 types of domestic stocks, including large capitalization growth stocks and medium capitalization utility stocks; 4 kinds of domestic bonds; 3 of international securities, and cash.

 

However, one may ask, “Wait, I’ve seen many advertisements from Blackrock stating they created the first target date fund.  Are you sure it was Wells Fargo?”  There is some complication around that topic!  Indeed, when looking at the oldest target date mutual funds, both Blackrock and Wells Fargo have a fund with the same incept (3/1/1994).  Here is a history of what we’ve found from looking at various sources.

 

In 1993, Wells Fargo partnered with Nikko via a JV to create the first target date fund, the aforementioned Stagecoach Lifepath funds.  However, in 1995 the firms agreed to sell the JV to Barclays, who combined it with its own investment advisory arm BZW.  Along with the JV, Wells Fargo also sold the Masterworks 401(k) division to Barclays. As part of the whole transaction, the StageCoach Lifepath funds were renamed to the Masterworks Lifepaths funds.  Additionally, Wells Fargo remained on as a subadviser to these funds (with BZW being the adviser).

 

In 1999, things became more complicated.  Norwest Bank merged with Wells Fargo (and kept the Wells Fargo name).  In what appears to be coinciding changes, the Masterworks Lifepath funds divided into two separate funds based on share classes.  The institutional share class stayed with Barclays and was renamed the BGI (Barclays Global Investors) Lifepath funds.  The other share classes remained with Wells Fargo and were renamed the Wells Fargo Lifepath funds.  While a bit opaque, it appears Wells Fargo was removed as the subadviser on the BGI funds.

 

From 1999 to 2001, both entities shared the LifePath name.  However, in 2001, this was no longer the case.  Whether it was regulatory or by choice, Wells Fargo separated itself from Barclays (previously the funds rolled up to a master/feeder structure) and removed the term “LifePath” from its name, becoming the “Wells Fargo Outlook” funds.  However, Barclays Global Fund Advisers (BGFA) remained on as subadviser.  Additionally, the BGI LifePath funds were renamed the “Barclay’s LifePath” funds.

 

This seems to be the point in history where Wells Fargo lost claim to the ‘oldest’ target date, and that claim stayed with Barclays (via the Nikko acquisition) until 2009, when Blackrock acquired Barclays, and hence laid claim to the oldest target date (again via acquisition).  Since then Blackrock has become a bit of a juggernaut in the target date space with its numerous variations of the Lifepath brand.  The original fund is still in existence but was changed to the Blackrock Lifepath Dynamic series in 2016.  However, the broader reaching effects of the Lifepath brand can be felt throughout the industry.

 

The split-off of the original fund to Wells Fargo also still exists today but has also gone through numerous changes since 2001.  In 2005, the funds rebranded to the Wells Fargo Advantage Outlooks funds.  In 2006, Wells Fargo partnered with Dow Jones to create the Wells Fargo Dow Jones Advantage funds (which were subadvised by a firm named GIA, who worked with Dow Jones to create the underlying TDF index).  In 2015, Wells Fargo dropped the “Advantage” from the name.  Lastly, in 2017, Wells Fargo removed Dow Jones/GIA from the series and became the Wells Fargo Outlook funds.

 

We have not delved into how all these changes for the various series actually affect the management of said series.  These changes (along with numerous other issuers’ changes) will be topics on forthcoming posts, so stay tuned!

 

So where does that leave us today?  While there is no doubt TDFs have been a success, it is now a much more complicated universe than back in 1993.  We will continue to dissect the universe to help create clarity.

1: https://www.nytimes.com/1994/03/14/business/wells-fargo-to-offer-funds-designed-for-baby-boomers.html

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Author: Clayton Fresk

Clayton Fresk joined Stadion Money Management in 2009 and currently serves as Portfolio Manager of Stadion’s Retirement investment strategies, which comprises oversight of Stadion’s managed account, target-date, and risk-based strategies. He provides thought leadership for Stadion’s participant level, customized retirement solutions, in order to ensure that its glide path technology and asset allocation are able to support all intermediaries in the defined contribution ecosystem. Clayton holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Minnesota. He also received an MBA degree and a Bachelor's degree in Finance & Marketing from the University of Minnesota.

1994asset managementBlackrockLifePathTarget Date Fund HistoryTarget Date Fund OriginTDFsWells Fargo
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Written By:

Clayton Fresk

Clayton Fresk joined Stadion Money Management in 2009 and currently serves as Portfolio Manager of Stadion’s Retirement investment strategies, which comprises oversight of Stadion’s managed account, target-date, and risk-based strategies. He provides thought leadership for Stadion’s participant level, customized retirement solutions, in order to ensure that its glide path technology and asset allocation are able to support all intermediaries in the defined contribution ecosystem. Clayton holds the Chartered Financial Analyst designation and is a member of the CFA Institute and the CFA Society of Minnesota. He also received an MBA degree and a Bachelor's degree in Finance & Marketing from the University of Minnesota.


There is no guarantee of the future performance of any Stadion account. Material has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Results based on available universe of Target Date Fund Series, which includes registered mutual funds, and non-registered collective investment funds and insurance accounts. Collective investment funds and insurance accounts are only available for investment to qualified retirement plan assets such as 401(k) plans.

 

The commentary, analysis and opinions expressed are those of Stadion’s Investment Team. The commentary, analysis and opinions referenced are as of the date of publication and are subject to change without notice. This material is for informational purposes only and should not be considered investment advice. This is not a recommendation to buy or sell a particular security. The investment strategy or strategies discussed may not be suitable for all investors.

 

Investors must make their own decisions based on their specific investment objectives and financial circumstances. Stadion Money Management, LLC (“Stadion”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Stadion’s investment advisory services can be found in its Form ADV Part 2, which is available upon request.

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