Vanguard's Target-Date Funds Earn Top Marks
Oppenheimer brings up the rear, according to new Morningstar reports.
When Morningstar pulled back the curtain on its 20 new Target-Date Fund Series Rating and Research Reports today, Vanguard Target Retirement funds were standing in the spotlight, while Oppenheimer got the hook.
A brutal market environment in 2008 dug a wide trench between winners and losers, but target-date funds' performance in last year's market slide is only part of the story here. It's true that the Vanguard funds' losses were relatively slimmer, while Oppenheimer's funds took it on the chin. Oppenheimer Transition 2010 (OTTNX), a fund designed for investors retiring next year, lost a whopping 41% in 2008, which was a full 18 percentage points worse than the fund's category mean.
But the Morningstar Target-Date Fund Series Rating and Research Reports consider far more than performance in their evaluations. The methodology also evaluates the people, parent, portfolio, and price behind the funds. Target-date series that earn a Top rating have not only delivered good, risk-adjusted performance for shareholders, but they exhibit other best-practices that should make these funds stand out over the long term.
Laura Pavlenko Lutton does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.