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Vanguard's Target-Date Fund Flows Plummet in 2020

Overall, target-date fund annual flows turn negative for the first time.

  • Amid economic stress and uncertainty, investors pulled a net $6.7 billion from target-date mutual funds in 2020 after contributing a net $59.7 billion in 2019. It’s the first calendar year that target-date mutual funds had net outflows since Morningstar started tracking the data in 1994.
  • The December liquidation of the $10 billion KP Retirement Path series turned flows negative for the year; excluding that liquidation, investors contributed a net $3.5 billion for the year, the lowest net contribution since 2000.
  • Total target-date mutual fund assets still reached a record $1.58 trillion at the end of 2020, up from $1.38 trillion in 2019 as market appreciation lifted assets.
  • The average target-date category return in 2020 ranged from 15% for the vintages furthest from retirement, to 9% for funds in retirement.
  • Vanguard Target Retirement series saw the biggest year-over-year change in contributions. Its net inflows fell to less than $3 billion in 2020, down from $31 billion in 2019. Six of the top 10 mutual fund series ranked by flows in 2020 saw less flows last year than in 2019.
  • The Fidelity Freedom Index series attracted more net new money than any other target-date mutual fund series in 2020, the first year Vanguard hasn’t led the industry in flows since 2008. 
  • Of flows into the top 10 series, 60% went toward index-based series, highlighting the continued importance fees play in driving target-date flows.
  • This data doesn’t include flows into collective investment trusts, which made up about 40% of the target-date market at the end of 2019. Collective investment trust data is reported quarterly on a lag so year-end data is not currently available.

The first quarter’s market panic and the ensuing economic uncertainty have put retirement investments under pressure for both companies and participants. Overall contributions to target-date mutual funds turned negative for the first time in 2020.