Target Risk Funds

Edwin J. Elton, Martin J. Gruber and Andre de Souza

European Financial Management, 2016, vol. 22, issue 4, 519-539

Abstract: There is a vast literature which shows that investors don't make rational decisions in allocating resources among different investments. Target risk funds and target date funds are two types of mutual funds primarily organised as fund of funds that make the asset allocation decision for an investor. Both are used as options in 401(k) plans and Individual Retirement Accounts. However they control for risk in very different ways. Target risk funds have not been studied. This article is the first comprehensive study of their characteristics and performance and how they compare to target date funds as an investment.

Date: 2016
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