PLANADVISER - January/February 2019 - 11

investment focus
Most TDFs Are Actively Managed
Passively managed target-date funds make up a small universe
B
y far, the most common type
of investment class in defined
contribution (DC) plans is targetdate
funds (TDFs), according to the
2018 PLANSPONSOR Defined Contribution
Survey. Among plans of all sizes,
77.0% offer TDFs. These are followed
by balanced funds (70.0%), money
market funds (59.8%),
stable
managed
value
funds (57.5%), target-risk funds (41.7%),
professionally
accounts
(34.0%), real estate/real estate investment
trusts (REITs) (27.8%), socially
responsible funds (11.8%), employer
risk funds (6.5%) and alternative
investments (5.1%).
Because target-date funds are so
incredibly important to a retirement
plan advisory practice serving defined
contribution plans, and because the
debate between actively managed and
passively managed funds continues to
heat up as lawsuits centered around
fees abound, we decided to take a look
at flows into passively managed vs.
actively managed TDFs.
For the trailing 12 months through
this past November 30, actively
managed TDFs had $49 billion in
inflows, and passively managed TDFs
had $11 billion, according to Strategic
Insight Simfund data. Assets in
individual actively managed TDFs far
surpassed those in passively managed
TDFs. For instance, the No. 1 actively
managed TDF, the Vanguard Target
Retirement 2025 fund, had $40 billion
in assets as of November 30, whereas
the No. 1 passively managed TDF, the
BlackRock LifePath Index 2030 fund,
had $6 billion.
Yet, speakers at the 2018 Best
of PSNC [PLANSPONSOR National
Conference] said there is a place for
both active and passive management
in defined contribution plans.
For example, Jason Brafman,
director at John Hancock Investments,
said that active management might be
a better way to go with an emerging
market fund. -Lee Barney
Top 10 Actively Managed Target-Date Funds, Total Assets
$40b
Vanguard Inst Target Retirement 2025
Fidelity Freedom 2020
Fidelity Freedom 2025
Vanguard Inst Target Retirement 2030
Vanguard Target Retirement 2040
$35b
$33b
$32b
$31b
$28b
$28b
$26b
$25b
$25b
Vanguard Target Retirement 2025
Vanguard Target Retirement 2030
Vanguard Target Retirement 2035
Vanguard Target Retirement 2020
Fidelity Freedom 2030
Top 10 Passively Managed Target-Date Funds, Total Assets
$6b
BlackRock LifePath Index 2030
BlackRock LifePath Index 2040
BlackRock LifePath Index 2020
BlackRock LifePath Index 2025
BlackRock LifePath Index 2035
BlackRock LifePath Index Retirement
BlackRock LifePath Index 2050
BlackRock LifePath Index 2045
BlackRock LifePath Index 2055
BlackRock LifePath Index 2060
$5b
$4b
$3b
$3b
$2b
$2b
$2b
$1b
$1b
Flows Into Passively and Actively Managed Target-Date Funds
Trailing 12 Months Through November 30, 2018
Actively managed TDFs
Passively managed TDFs
Source: Strategic Insight Simfund
All data as of November 30, 2018
$49b
$11b
planadviser.com January-February 2019 | 9
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PLANADVISER - January/February 2019

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