S&P Target Date Scorecard

[Pages:13]Research

S&P Target Date Scorecard

Contributors

SUMMARY

Louis Bellucci

The S&P Target Date? Scorecard provides performance comparisons,

Associate Director

equal- and asset-weighted category averages, and analytics covering

Product Management U.S. Equities louis.bellucci@

the target date fund (TDF) universe. Past performance of the "Through" glide path category, as represented

by the S&P Target Date Through benchmarks, is significantly different

Adri?n Carranza Araujo

from that of the "To" category, as represented by the S&P Target Date

Senior Specialist Global Equities Indices adrian.carranza@

To benchmarks. This is because of generally higher equity allocations within the Through TDFs. Report 4 shows the difference in three-year annualized total returns between the To and Through benchmarks by

vintage. The maximum difference of 1.58% occurred in the 2015

vintage, while the minimum was in 2060+.

As has been the case in past scorecards, most asset-weighted

average TDF returns continued to be higher than equal-weighted

returns over one-, three-, and five-year time horizons. This indicates

that some larger TDFs earned relatively higher returns than some of

the smaller counterparts. Among other factors (such as differences in

net expenses), this may reflect greater equity allocations in larger

TDFs during the U.S. equity market rally since early 2009.

The S&P Target Date Index Series is a representative benchmark for

TDFs. The series is used extensively throughout the report and

distinguishes itself from peer group benchmarks because it is

investable, comprises consensus-derived asset allocation weights, and

its composition is known in advance of evaluation periods.

The S&P Target Date To and Through Indices offer stakeholders style-

specific measures of the two prominent approaches to glide path

management within the TDF universe. These indices may be

appropriate for plans that seek a tighter-fitting TDF benchmark than

one covering the entire industry.

Underlying data is obtained from the Morningstar? U.S. Open-End

Fund Database. The S&P Target Date Scorecard is published

semiannually.

Register to receive our latest research, education, and commentary at go.SignUp.

S&P Target Date Scorecard

Mid-Year 2019

A UNIQUE SCORECARD FOR THE TARGET DATE UNIVERSE

The S&P Target Date Scorecard presents the performance of TDFs as compared to appropriate benchmark indices. We consider all target date asset allocation policies to be active decisions, so we include funds that use passive underlying investments as well as active underlying investments. The scorecard covers target dates from retirement income to 2060 and beyond, and it has the following unique features.

A Representative Target Date Benchmark: The S&P Target Date Index1 is the only consensusdriven target date benchmark offered by an independent index provider. Its asset class exposure and glide path are functions of market observations acquired from an annual survey of target date managers. The index currently includes target dates from retirement income through 2060+. The S&P Target Date To Retirement Income and the S&P Target Date Through Retirement Income series were launched in January 2015, and performance is incorporated as accumulated history becomes available.

Apples-to-Apples Comparison: Target date fund returns are sometimes compared to popular asset class benchmarks such as the S&P 500 or Bloomberg Barclays U.S. Aggregate Bond Index. The S&P Target Date Scorecard avoids this pitfall by measuring a fund's returns against the returns of the benchmark that is most appropriate for each target date category.

Asset Allocation Risk Revealed: Sometimes custom, multi-asset class benchmarks are used for comparison purposes. However, these benchmarks do not measure asset allocation risk, as they are typically set with asset class exposure selected by fund managers. They also may lack transparency with respect to the method behind their calculation and may not be adjusted for changes in asset allocation policy over time. The report avoids these problems by referencing our consensus-driven target date benchmark that provides a representative proxy of asset allocation risk for each target date vintage.

Asset-Weighted Returns: Average returns for a fund group are often calculated using only equal weighting, which results in the returns of a USD 10 billion fund affecting the average in the same manner as the returns of a USD 10 million fund. An accurate representation of how market participants fared in a particular period can be better ascertained by calculating weighted-average returns, in which each fund's return is weighted by net assets. The S&P Target Date Scorecard shows both equal- and asset-weighted averages. Additionally, we now use all share classes to calculate average TDF returns and performance quartiles.

Data Cleaning: Appropriate peer groups are built from underlying databases so meaningful benchmark comparisons may be performed. TDFs with vintages of 2060 or beyond are compared with the S&P Target Date 2060+ Index. TDFs with vintages that have already passed, such as 2005, are compared with the S&P Target Date Retirement Income Index. Average TDF returns, both equal-weighted and asset-weighted, are calculated using all share classes within each fund family in order to represent the aggregate experience of TDF shareholders. The S&P Target Date Scorecard offers the only comprehensive, periodic, and publicly available source of such data. Reports are available at .

1 It is not possible to invest directly in an index. Indices are statistical composites and their returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance.

RESEARCH | Retirement

2

S&P Target Date Scorecard

Mid-Year 2019

Report 1: S&P Target Date Benchmark Glide Path ? Total Equity

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0% 2060+

Target Date

91.0%

Target Date Through 91.7%

Target Date To

88.9%

2055

90.6% 91.8% 87.3%

2050

89.4% 91.1% 85.2%

2045

87.6% 90.8% 84.2%

2040

83.7% 88.1% 77.9%

2035

77.6% 82.1% 70.4%

2030

68.1% 74.9% 59.8%

2025

58.3% 65.2% 49.3%

2020

48.8% 56.8% 36.4%

2015

43.4% 46.7% 31.1%

2010

Ret Income

38.1% 34.3%

41.2% 36.7%

33.6%

Source: S&P Dow Jones Indices LLC, Morningstar Direct. Data as of June 28, 2019. Chart is provided for illustrative purposes. Past performance is no guarantee of future results. The S&P Target Date To 2010 was discontinued effective June 5, 2016.

Report 2: Target Date Fund Category Performance ? One Year

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00 2060+

90th Percentile 6.41

10th Percentile 3.66

Index

5.12

2055

6.39 3.54 5.03

2050

6.40 3.57 5.04

2045

6.51 3.82 5.15

2040

6.69 3.96 5.26

2035

6.94 4.36 5.36

2030

7.01 4.36 5.56

2025

7.08 4.76 5.70

2020

7.09 4.50 5.79

2015

6.94 4.78 5.78

2010

6.88 4.86 5.87

Ret Income

7.09 4.49 5.92

Source: S&P Dow Jones Indices LLC, Morningstar Direct. Data as of June 28, 2019. Chart is provided for illustrative purposes. Past performance is no guarantee of future results.

RESEARCH | Retirement

3

S&P Target Date Scorecard

Mid-Year 2019

Report 3: Average Target Date Fund Performance

CATEGORY

ONE-YEAR (%)

Ret Income TDFs (equal weighted)

5.78

Ret Income TDFs (asset weighted)

6.01

S&P Target Date Ret Income

5.92

S&P Target Date To Ret Income

6.09

S&P Target Date Through Ret Income

5.94

THREE-YEAR ANNUALIZED (%) 5.02 5.31 5.03 4.43 5.22

FIVE-YEAR ANNUALIZED (%) 3.52 3.77 3.94 3.61 4.05

2010 TDFs (ew)

5.88

2010 TDFs (aw)

5.91

S&P Target Date 2010

5.87

S&P Target Date To 2010

-

S&P Target Date Through 2010

5.96

5.86

4.08

6.09

4.29

5.80

4.34

-

-

6.17

4.55

2015 TDFs (ew)

5.89

2015 TDFs (aw)

6.04

S&P Target Date 2015

5.78

S&P Target Date To 2015

5.62

S&P Target Date Through 2015

5.81

6.46

4.38

6.74

4.74

6.54

4.77

5.52

4.11

7.10

5.05

2020 TDFs (ew)

5.79

2020 TDFs (aw)

5.95

S&P Target Date 2020

5.79

S&P Target Date To 2020

5.66

S&P Target Date Through 2020

5.78

6.67

4.47

7.35

4.97

7.28

5.15

6.42

4.57

7.92

5.47

2025 TDFs (ew)

5.88

2025 TDFs (aw)

5.92

S&P Target Date 2025

5.70

S&P Target Date To 2025

5.68

S&P Target Date Through 2025

5.62

7.80

5.02

8.28

5.49

8.09

5.53

7.28

5.00

8.67

5.91

2030 TDFs (ew)

5.69

8.61

5.46

2030 TDFs (aw)

5.76

9.39

5.98

S&P Target Date 2030

5.56

8.82

5.89

S&P Target Date To 2030

5.54

8.08

5.40

S&P Target Date Through 2030

5.59

9.49

6.32

Source: S&P Dow Jones Indices LLC, Morningstar Direct. Data as of June 28, 2019. "ew" indicates equal weighted. "aw" represents asset weighted. Table is provided for illustrative purposes. Past performance is no guarantee of future results. See Glossary for more information.

RESEARCH | Retirement

4

S&P Target Date Scorecard

Mid-Year 2019

Report 3: Average Target Date Fund Performance (cont.)

CATEGORY

ONE-YEAR (%)

2035 TDFs (ew)

5.58

2035 TDFs (aw)

5.53

S&P Target Date 2035

5.36

S&P Target Date To 2035

5.31

S&P Target Date Through 2035

5.50

THREE-YEAR ANNUALIZED (%) 9.60

10.26 9.51 8.69

10.10

FIVE-YEAR ANNUALIZED (%) 5.88 6.45 6.24 5.66 6.64

2040 TDFs (ew)

5.34

2040 TDFs (aw)

5.40

S&P Target Date 2040

5.26

S&P Target Date To 2040

5.19

S&P Target Date Through 2040

5.31

9.89

6.06

10.73

6.59

10.01

6.47

9.40

6.00

10.57

6.85

2045 TDFs (ew)

5.29

2045 TDFs (aw)

5.34

S&P Target Date 2045

5.15

S&P Target Date To 2045

5.18

S&P Target Date Through 2045

5.18

10.42

6.26

10.94

6.75

10.33

6.61

9.80

6.16

10.80

6.93

2050 TDFs (ew)

5.20

2050 TDFs (aw)

5.36

S&P Target Date 2050

5.04

S&P Target Date To 2050

5.13

S&P Target Date Through 2050

5.14

10.32

6.28

10.98

6.72

10.61

6.73

10.11

6.27

10.98

6.98

2055 TDFs (ew)

5.20

2055 TDFs (aw)

5.36

S&P Target Date 2055

5.03

S&P Target Date To 2055

4.99

S&P Target Date Through 2055

5.07

10.63

6.35

11.05

6.86

10.80

6.79

10.34

6.34

11.03

6.96

2060+ TDFs (ew)

5.23

10.76

6.60

2060+ TDFs (aw)

5.43

11.13

6.82

S&P Target Date 2060+

5.12

11.01

6.87

S&P Target Date To 2060+

5.17

10.65

6.51

S&P Target Date Through 2060+

5.07

11.09

6.99

Source: S&P Dow Jones Indices LLC, Morningstar Direct. Data as of June 28, 2019. "ew" indicates equal weighted. "aw" represents asset weighted. Table is provided for illustrative purposes. Past performance is no guarantee of future results. See Glossary for more information.

RESEARCH | Retirement

5

S&P Target Date Scorecard

Mid-Year 2019

Report 4: Difference in Three-Year Total Return between To and Through Indices by Vintage

1.8%

1.6%

1.58%

1.4%

1.49%

1.39%

1.41%

1.42%

1.2% 1.0% 0.8% 0.6% 0.4%

1.16%

0.99%

0.88%

0.69%

0.43%

0.2%

0.0%

2015

2020

2025

2030

2035

2040

2045

2050

2055

2060+

Difference in Three-Year Annualized Total Return Between To & Through Benchmarks

Source: S&P Dow Jones Indices LLC, Morningstar Direct. Data as of June 28, 2019. Chart is provided for illustrative purposes. Past performance is no guarantee of future results.

RESEARCH | Retirement

6

S&P Target Date Scorecard

Mid-Year 2019

Report 5: Quartile Breakpoints of Target Date Funds

FUND CATEGORY

THIRD QUARTILE

SECOND QUARTILE

FIRST QUARTILE

ONE-YEAR

Ret Income

6.61

5.84

5.31

Target 2010

6.52

5.81

5.31

Target 2015

6.58

5.82

5.25

Target 2020

6.50

5.89

5.26

Target 2025

6.52

5.99

5.25

Target 2030

6.40

5.78

5.04

Target 2035

6.18

5.60

4.90

Target 2040

6.01

5.42

4.59

Target 2045

5.98

5.41

4.58

Target 2050

5.97

5.36

4.42

Target 2055

5.93

5.35

4.43

Target 2060+

5.95

5.45

4.64

THREE-YEAR

Ret Income

5.72

5.05

4.37

Target 2010

6.55

6.00

5.58

Target 2015

7.13

6.48

6.06

Target 2020

7.57

6.90

6.09

Target 2025

8.54

7.88

7.30

Target 2030

9.50

8.71

7.98

Target 2035

10.32

9.58

9.04

Target 2040

10.68

10.00

9.37

Target 2045

11.03

10.36

9.88

Target 2050

11.08

10.34

9.84

Target 2055

11.20

10.62

10.02

Target 2060+

11.37

10.88

10.33

FIVE-YEAR

Ret Income

4.08

3.62

2.91

Target 2010

4.64

4.31

3.75

Target 2015

4.95

4.51

4.00

Target 2020

5.02

4.64

3.91

Target 2025

5.48

5.12

4.55

Target 2030

5.99

5.54

4.92

Target 2035

6.38

5.86

5.35

Target 2040

6.59

6.11

5.48

Target 2045

6.74

6.21

5.73

Target 2050

6.80

6.28

5.78

Target 2055

6.83

6.34

5.90

Target 2060+

6.99

6.65

6.24

Source: S&P Dow Jones Indices LLC, Morningstar Direct. Data as of June 28, 2019. Table is provided for illustrative purposes. Past performance is no guarantee of future results.

RESEARCH | Retirement

7

S&P Target Date Scorecard

Mid-Year 2019

Report 6: Three-Year Risk/Return by Target Date

8

Three-Year Annualized Total Return (%)

6

4

2

0

0

2

4

6

8

Three-Year Annualized Standard Deviation (%)

Target Date Retirement Income

S&P Target Date Retirement Income

S&P Target Date Through Retirement Income

S&P Target Date To Retirement Income

10

Three-Year Annualized Total Return (%)

8

6

4

2

0 2

10

Target Date 2010

4

6

8

Three-Year Annualized Standard Deviation (%)

S&P Target Date 2010

S&P Target Date Through 2010

Three-Year Annualized Total Return (%)

8

6

4

2

0 2

Target Date 2015

4

6

Three-Year Annualized Standard Deviation (%)

S&P Target Date 2015

S&P Target Date Through 2015

8 S&P Target Date To 2015

Source: S&P Dow Jones Indices LLC, Morningstar Direct. Data as of June 28, 2019. Charts are provided for illustrative purposes. Past performance is no guarantee of future results.

RESEARCH | Retirement

8

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download