Jeremy Glaser: Target-date funds could be a great all-in-one, hands-off option for investors saving for retirement. But not all target-date series are created equally. From fees to the mix of asset classes it owns to how that mix changes over time, there could be a lot to consider. We asked our analysts to share three of their favorite series.
Jeff Holt: The BlackRock LifePath Index target date funds are a solid choice for investors looking for an all-in-one solution for their retirement savings. While the funds have only been around since 2011, BlackRock's history with target-date funds goes back to the 1990s. And while these funds might be considered passive because they invest in index funds and ETFs, BlackRock has consistently applied a research-driven, proactive approach in designing the glide path and in selecting these underlying asset classes for the funds.
For instance, BlackRock has well-documented rationale on the reasoning behind not shifting the portfolios once they hit their target date as well as behind the decisions to exclude certain asset classes from the underlying mix such as foreign bonds and high-yield bonds. Plus, the funds come at a low cost which is appealing to foreign investors and all of this makes it a good target-date series. All these attributes make the BlackRock LifePath Index funds a solid choice for investors.
Leo Acheson: JPMorgan SmartRetirement target-date series is a top-rated option in our view. In fact, it's the only Gold-rated plan that invests exclusively in actively managed underlying funds. We think that the series hits the mark on a number of fronts. First of all, the management team is very tenured, with Anne Lester and Dan Oldroyd serving at the helm since its 2006 inception. They are also supported by a very broad group of more than 80 investment professionals in the multi-asset group.
Additionally, their process is strong on a number of fronts. For instance, their strategic asset allocation remains robust and has been consistent over time. Their manager selection process is very thoughtful. In fact, they won't hesitate to fire one of their own managers when they deem it's appropriate. Additionally, their tactical allocation process has been in place for over 15 years and they have proven an ability to add value in the majority of those years. Overall, the fund has actually improved during the last year as it has lowered fees and some of the underlying funds were upgraded by Morningstar analysts. Performance has been stellar, and overall, we think that the fund will continue to be a great option for investors.
Heather Larsen: The Gold-rated Vanguard Target Retirement Series is an excellent choice for investors as it provides a well-diversified asset class mix that will help investors reach their long-term retirement goals. While the series' glide path hews close to the industry norm, it's subasset class exposure represents one of the most globally diverse in the industry. International equities account for about 40% of the series' underlying equity exposure, while 30% of the bond portfolio is stashed abroad. A lean set of passively managed index strategies makes up the serious underlying components.
Strong oversight for this series is provided Vanguard Strategic Asset Allocation Committee which includes senior level executives at the firm like Vanguard's chief economist. The Committee is responsible for all decisions relating to this series' glide path construction, asset allocation, and underlying fund selection.
Finally, low costs here provide an enduring head start against the competition. This series investor share class costs 13 to 15 basis points which ranks among the cheapest in the industry.