Target Date Funds: Characteristics and Performance

Edwin J. Elton, Martin J. Gruber, Andre de Souza and Christopher R. Blake

The Review of Asset Pricing Studies, 2015, vol. 5, issue 2, 254-272

Abstract: As a result of poor asset allocation decisions by 401(k) participants, 72% of all plans now offer target date funds, and participants heavily invest in them. Here, we study the characteristics and performance of TDFs, providing a unique view by employing data on TDFs holdings. We show that additional expenses charged by TDFs are largely offset by the low-cost share classes they hold, not normally open to their investors. Additionally, TDFs are very active in their allocation decisions and increasingly bet on nonstandard asset classes. However, TDFs do not earn alpha from timing or their selection of individual assets.

JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:oup:rasset:v:5:y:2015:i:2:p:254-272.

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