arrow_backReturn

3Q20 TDF Flows

With another quarter in the books, we’ll take another look at asset flows within the Target Date industry.

Avatar

By Clayton Fresk on November 11, 2020



With another quarter in the books, we’ll take another look at asset flows within the Target Date industry.

 

The first point we’ll touch on is the vehicle of choice, whether it be mutual funds or Collective Investment Trusts (CITs).  We’ve seen a trend of issuers and investors favoring the CIT structure, and that trend continued this quarter:

 

Mutual Fund: -$8.4BB
CIT: +$16.0BB
(Data Source: Morningstar)

 

It’s easy to only look at the mutual fund side of this equation since data is more readily available, but omitting CITs from the analysis could give a misleading story of the actual flows.

 

Another point we’ve touch on previously is investors switching from Active TDFs to Passive or Blend TDFs, again a trend we saw continue during 3Q:

 

Active: -$11.3BB
Passive: +$17.2BB
Blend: +$1.7BB
(Data Source: Morningstar)

 

While various issuers offer multiple versions of their TDF (whether Active, Passive, or Blend), some have seen more movement than others.  One that sticks out this quarter is Fidelity, who within the mutual fund structure had over $2BB switch from their Freedom series into their Freedom Index series.

 

Whether it be switching from a mutual fund to a CIT structure, or switching from an Active to a Passive TDF, we believe one of the main driving factors behind the move is fees.  Here is a chart of 3Q TDF flows by fee category:

 

(Chart Source: Stadion)

 

The unsweet spot in terms of asset flows this quarter was TDF with fees between 0.5% and 0.7%, with this group losing a combined $7.7BB.  Not surprising the group garnering the most Assets Under Management (AUM) are TDFs with fees less than 0.1%.

 

The trend we’ve seen in the TDF market is towards lower cost products, whether it be a CIT over a mutual fund or a passive over active.  As we enter the 4th quarter and plan sponsors and investors continue to evaluate options in the market, we’ll see if this trend continues.

Avatar

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.

3Q20AUM FlowsTarget Date FundTDFs
Avatar
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.

 

This document may contain certain information that constitutes “forward-looking statements” which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology. No assurance, representation, or warranty is made by any person that any of Stadion’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.

 

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.

 

©2020 Stadion Money Management, LLC. All rights reserved. Stadion and the Stadion S are registered service marks of Stadion Money Management, LLC. StoryLine is a service mark of Stadion Money Management, LLC.

 

SMM-112020-745