Heterogeneity in Target-Date Funds: Optimal Risk-Taking or Risk Matching?

Pierluigi Balduzzi and Jonathan Reuter

No 17886, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Following the Pension Protection Act of 2006, there was a sharp increase in the use of TDFs as default investment options in defined contribution retirement plans. We document large differences in realized TDF returns and risk profiles, even for funds with the same target retirement date. Using fund-level data, we find evidence that this heterogeneity reflects optimal risk-taking by fund families with low market share, especially those entering the market after 2006. Using plan-level data, we find little evidence that 401(k) plan sponsors match the risk profile of the TDFs in their plans to the risks of their companies.

JEL-codes: G11 G18 G23 (search for similar items in EconPapers)
Date: 2012-03
Note: AG IO
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Citations: View citations in EconPapers (5)

Published as Balduzzi, Pierluigi, and Jonathan Reuter, 2019, “Heterogeneity in Target Date Funds: Strategic Risk-taking or Risk Matching?” Review of Financial Studies 32 (1): 300-337.

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