One of the most decorated tennis players—tied for 14th on the all-time number of grand slams list—is John McEnroe. However, he is probably remembered by most for his frequent questioning of the chair umpire. His most memorable tirade in 1981 at Wimbledon was a quote that eventually provided the title for his memoir… “You cannot be serious!”
By Will McGough on November 29, 2019
One of the most decorated tennis players—tied for 14th on the all-time number of grand slams list—is John McEnroe. However, he is probably remembered by most for his frequent questioning of the chair umpire. His most memorable tirade in 1981 at Wimbledon was a quote that eventually provided the title for his memoir… “You cannot be serious!” For great reason, Target Date Fund managers launch a variety of product iterations, called series, which represent a collection of individual target date fund vintages. From Mutual Fund to Collective Investment Trusts (CITs), some being Active, Passive, or a Blend of strategy, a few with twists on the style using Smart Beta verse Regular beta, the proliferation of Target Date series is getting serious!
Our friends at Morningstar and Plan Sponsor each do a good job producing an annual wrap-up report on the industry, but we’ve yet to find a source that categorizes all of these series based on their glide path. Before we begin, please note that the data examined here is all as of September 30, 2019 and the TDF managers are mentioned because they have multiple series. Let’s dig into some examples and data, starting with a summary:
- Our database has over 190 series, which represent 74 parents that we classified into 111 unique glide paths
- We then filter qualitatively and quantitative to arrive at 56 paths in our universe. Of the 55 excluded, 27 are based on qualitative reasoning (like alternative, index, managed account, heavy tactical, RMD-based), this drops the number of series to 161. The remaining 28 paths are excluded for having less than $100 million assets under management. The 56 paths represent 46 parents and have 126 series underneath their classification.
Let’s look at 2 charts now.
In the chart above, we are showing the number of series per glide path. Overall, Stadion has identified 111 glide paths. Our first screen is to remove glide paths that are not backed by a Mutual Fund, CIT, or variable Insurance Trust (VIT). Then we look at historical changes to glide paths. Those that have heavy use of tactical or alternatives or don’t easily report holdings are excluded. The chart above represents 84 paths (111 minus 27 excluded). These glide paths represent strategic or dynamic asset allocation in vehicles that are somewhat transparent and reported on.
- Fidelity Freedom has the most series tracking the Freedom glide path at 10 (1)
- Blackrock LifePath and their cousins at FlexPath are next in line with 6 (2)
- A host of glide paths have 3 to 5 series
- 11 paths have just 2, most likely a simple Mutual Fund and CIT version or some with Passive and Blend iterations
- Lastly, 55 glide paths have a sole series available
The chart above visually shows our summary. Again, all of the work in classifying glide paths is based on our research… which could be wrong as hard as we try to make sure it is not.
- We go from 191 Series to 126 after 2 rounds of filtering
- Parents progress from 74 at the start to 66 then 46 for final output
- Most importantly, these represent 111 glide paths for which 56 are used and 55 are filtered out
Much like the chair umpire at whom McEnroe was imploring to remain unbiased and objective, we too take the same view of all the series (i.e. variations) that one family may offer of a glide path. After all choice of implementation style and vehicle plus various cost points are all positives.
Where we would align with John “You cannot be serie(ou)s!” McEnroe is in our belief that as analysts, we should account for the glide path FIRST so that the primary driver of series performance can be understood. All too often we see folks having to choose a series to be the basis of some type of analysis.
Author: Will McGoughChief Investment Officer of Retirement Will McGough joined Stadion Money Management in 2003 and currently serves as Chief Investment Officer of Stadion’s Retirement investment strategies which comprises oversight of Stadion’s risk-based, target date, and managed account strategies. He is a member of the Investment Committee and Senior Management team, and serves as as Stadion’s Chief Investment Officer, Retirement. 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. Will received his BBA in Finance from the University of Georgia and also holds the Chartered Financial Analyst designation. Will is a member of the CFA Institute, the CFA Society of Atlanta, the American Association of Professional Technical Analysts, National Association of Active Investment Managers, the UGA Alumni Association and National Eagle Scout Association.
1The remaining 3 series can be found here, specific URL for each VIT
VIP Freedom Lifetime: https://fundresearch.fidelity.com/prospectus/annuities?product=FFLI
2The remaining Blackrock LifePath series are also found on the same link as Flexpath
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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