Research, analysis, and thoughts on retirement investments & the future of personalization
Exchange Traded Funds (ETFs) have become an increasingly popular investment vehicle in the industry for multiple reasons, some of which include costs and increased investment coverage (i.e. “Smart Beta” ETFs). There remains, however, a large corner of the market that has not seen ETF penetration and this is the defined contribution / 401k space.
Target Date Funds (TDFs) have a pre-determined glidepath which drives its asset allocation. While it does not happen frequently per se, this pre-determined path can be changed by the TDF issuer at any time. These adjustments can be smaller more fringe changes or more wholesale methodology changes.
While we believe individual TDF performance should not be analyzed on a quarter-by-quarter basis, regular examination of the industry as a whole can reveal general themes and interesting nuances.
In our exploration of “what is a glide path” we touched on their basic premise: to represent asset allocation over time for a Target Date Fund (TDF). Traditionally, when viewing a single glide path, the vertical (Y) axis represents equity exposure and, at times, can show a stacked area chart of overall asset allocation.