Is Total Return the Best Way to Measure Fund Performance?
The projected-income approach.
Making It Real
BlackRock dropped by earlier this week to discuss its new solutions-based funds. "Solutions-based funds," meaning funds such as target-date or managed-payout that describe themselves in terms of goals rather than what asset classes they hold, are the new black of investment marketing. In using that language, BlackRock is far from alone.
Its effort, though, is unusually ambitious. BlackRock aims not merely to offer funds that carry a different label but also to overturn the foundation of performance measurement: scoring funds by their total returns. The company argues that for investors approaching (or in) retirement, the better way to think about progress is the growth (or shrinkage) of projected income.