PLANADVISER - July/August 2019 - 11

investment focus
TDFs Help
Boost
Balances
T
arget-date funds (TDFs) have been
touted as an investment ideal for
participants who want to " set it and
forget it. " They have gathered incredible
assets since the start of their widespread
adoption as a qualified default
investment alternative (QDIA) over a
decade ago, that growth aided by automatic
enrollment. Those assets flowing
into the funds as a default coincided
with the Great Recession of 2008 and
the bottoming out of the market in
March 2009.
Fidelity Investments examined
the balances of participants who had
remained invested in their 401(k) plan
in the decade following the recession.
The combination of strong market
returns-the Standard & Poor's (S&P)
500 index delivered a 10-year annualized
total return of 17.8% since the
market's nadir-and auto-enrollment
led to
impressive
growth. Overall,
average balances soared 466%, from
$52,600 in the first quarter of 2009 to
$297,700 in the first quarter of 2019.
In periods of volatility, the common
wisdom is to encourage participants
to stay the course-to encourage
401(k) TDF Assets
Collective Trust
$553.3 billion
Mutual Fund
$481.1 billion
Separate Account
$29.4 billion
continued investment in the target-date
fund, for example.
Among Millennials and Generation
X, the account balance growth
well exceeded the average. Millennials'
balances
rose
1,762%,
from $7,000
to $129,800. Gen Xers' balances rose
626%, from $37,000 to $268,900. Baby
Boomers' balances
rose 367%,
from
$76,500 to $357,200.
Fidelity also looked at how different
generations fared if they had remained
invested for 15 years. Boomers' balances
reached $430,500, while those of Gen
Xers reached $347,200 and Millennials,
$152,400.
When examining use of TDFs in
the past 10 years, Fidelity found that,
in 2009, 16% of individuals had all of
their savings invested in a TDF. By the
first quarter of this year, that had risen
to 52%. In addition, only 7% individuals
had all of their savings in stocks, down
from 15% 10 years prior.
" When I think about the onus of
American workers having to save from
their paycheck for their own retirement,
despite market volatility, people
are staying the course, saving more and
taking advantage of the match, which
is fantastic news, " says Katie Taylor,
vice president of thought leadership at
Fidelity Investments in Boston.
When the market is uncertain,
agents at Fidelity's call center tell
investors to focus on the risk tolerance
appropriate for their age and their longterm
goals, and, as a result, they seldom
change their allocations, Taylor says.
-Lee Barney
Top 20 401(k) TDF Managers
1 Vanguard Group
2 T. Rowe Price
3 Fidelity Investments
4 BlackRock
5 JPMorgan
6 State Street Global Advisors
7 Principal Financial Group
8 American Funds
9 Wells Fargo
10 Charles Schwab
11 American Century Investments
12 Northern Trust
13 Callan Associates
14 SEI Group
15 AllianceBernstein
16 TIAA-Nuveen
17 Prudential
18 Aon Hewitt
19 Morningstar
20 Voya Financial
Data as of year-end 2017
Source: BrightScope, a business unit of Institutional Shareholder Services Inc. (ISS)
$373.2b
$142.7b
$135.3b
$117.3b
$62.4b
$35.8b
$33.2b
$32.5b
$14.5b
$13.5b
$12.1b
$7.6b
$7.1b
$4.8b
$4.5b
$4.4b
$4.2b
$4.0b
$3.5b
$3.4b
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