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Monday, July 06, 2009

Don't Let Target Date Funds Off the Hook, Writes the WSJ

News summary by MFWire's editors

Target date funds are drawing fire from the media for their poor performance at the end of last year. Now that the market is in a turnaround they continue to draw scrutiny. Wall Street Journal reporter Andrea Coombes writes that now is "not really" the time to let the funds off the hook even after their 25 percent gain since the market's March 9 bottom (the S&P 500 is up 36 percent in that time).

She points out that the five-biggest 2010 target-date funds dropped 29 percent from mid-October 2007 through March 9, leaving them short of break even. Indeed, those funds are down 16 percent on average for the year ended June 30.

Also covered briefly in the article is last month's hearing held by the DoL and the SEC that featured testimony from 35 industry consultants, fund managers and consumer advocates. The paper also reports that the meeting showed "plenty of disagreement about what target-date funds should and shouldn't be doing," but no clear next step.

Coombes does point out one relative winner among 2010 funds: the Wells Fargo Advantage DJ 2010 fund. That fund has lost just 6 percent for the year ending June 30.

EBRI President Dallas Salisbury states that "The industry has no consensus on what the problems are or if there are problems." He adds that "If the industry can't agree on any of that, the obvious answer is, 'If I don't think there's a problem, I'm not taking care of it.'" 

Edited by: Sean Hanna, Editor in Chief

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