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It's the Equities, Stupid!

A buoyant stock market lifted most target-date vessels in 2013.

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Target-date managers last year might well have put their own twist on James Carville's famous internal campaign slogan for Bill Clinton, "It's the economy, stupid!" Because it was equities' bull run that drove target-date funds' impressive returns for 2013.

The average fund in Morningstar's target-date 2041-2045 category, for instance, returned 22%, the category's best result since the post-crash rebound year of 2009 (see Table 1). The category's top fund,  Vantagepoint Milestone 2045 (VQRJX), reached almost 28%. Although that gain does not match the 32% leap of the S&P 500 Index in 2013, the numbers are impressive nevertheless, especially considering that the typical 2045 fund held at least 10% of assets in bonds and devoted a significant portion to non-U.S. stock markets, which did not keep up with U.S. equities.

Josh Charlson does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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