Research, analysis, and thoughts on retirement investments & the future of personalization
After a very rough 1st quarter and a very strong bounce-back during 2nd quarter, the 3rd quarter was a bit more normalized, albeit still relatively strong. Performance during 3Q20 was, across-the-board, positive and enjoyed the springboard of a strong July and August despite a bit of a pullback in September
Target Date Funds (TDFs) are often categorized by being active or passive based on the makeup of the underlying holdings. Many issuers also offer blended or hybrid TDF series, which utilize both active and passive underlying holdings. However, the specific blend of active and passive holdings can be very different among issuers.
Target Date Fund (TDF) issuers have a stated target glidepath they adhere to when building asset allocation within the different vintages. One caveat is that many issuers have the ability to adjust exposure from this target/baseline exposure based on market conditions. However, issuers also have the ability to alter this target glidepath as they see fit. Often, these changes are relatively minor, but sometimes a more significant shift may occur.
With the market trepidation of the 1st quarter having quickly receded, the 2nd quarter was notable for its complete turnaround performance-wise. Equities climbed significantly higher, with some areas of the market surpassing recent highs from late March. Fixed income kept moving right along as interest rates stayed relatively flat during the quarter. So, how did Target Date Fund performance fare?
With the United States, and world, currently entrenched in pretty massive uncertainty around COVID-19, unemployment, finances, politics, etc., it’s not surprising the industry saw a pretty massive dip in Target Date Fund (TDF) flow for the 2nd quarter. In this piece, we’ll look at those trends as well as track some general quarterly flow data.