Among the points raised today in the presentation and subsequent review by the discussant:
- 88% of Target Date Funds (TDFs) are found in qualified retirement plan accounts at present.
- The Pension Protection Act of 2006 permitted TDFs to be designated as default options in retirement plans.
- Internal "fund-of-funds" TDFs underperformed single fund (stock/bond mix) TDFs, and underperformed balanced funds with similar asset allocations. This underperformance exceeded 50 bps per year, on average, for the period studied (2001-2008).
- On average, internal "fund-of-funds" TDFs included from their fund families higher-annual-expense-ratio funds, and funds with weaker performance histories.
- The discussant observed that Fidelity, Vanguard and T. Rowe Price, who together dominant so much of the market, might be evaluated as to their TDF offerings separately. It is possible that the underperformance of internal "fund-of-funds" Target Date Funds may be attributable to high-cost fund families, such as those found in many group annuity insurance contracts.