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A Breakdown of Target-Date Mutual Funds in 2024

Net flows increased to $156 billion last year.


Key Takeaways

  • Target-date strategies hit a record $3.5 trillion at the end of 2023 due to positive flows and strong market appreciation.

  • Total target-date flows amounted to about $156 billion across mutual fund and collective investment trusts. Investors prefer the lowest-cost target-date options. In 2023, the cheapest target-date mutual fund fee quintile had roughly $80 billion in inflows while the four other quintiles experienced outflows.

  • Providers offer cheaper alternatives by offering multiple series with the same glide path but swapping actively managed underlying funds for index-trackers yet returns have remained in line.

Investors continue to invest their retirement savings in target-date strategies. The industry hit a record $3.5 trillion at the end of 2023, it’s clear that these strategies remain popular.

By having a deeper understanding of target-date strategies, asset managers are better able to conduct competitive analysis and deliver more differentiated offerings. Our Morningstar researchers delve into the landscape by analyzing target-date flows, fees, performance, top picks based on the Morningstar Medalist Rating, and more.

To read the full research report, download a copy here.

Assets Hit a Record High

Due to positive flows and strong market appreciation, target-date strategies reached a record $3.5 trillion at the end of 2023. Part of their growth was fueled by investors depositing nearly $522 billion in target-date strategy assets over the past four years.

It’s important to note that target-date collective investment trusts’ (CIT) assets almost caught target-date mutual funds’ in 2023. These assets dominated net inflows but at the end of the year only reached 49% of the market share. Still, CITs are poised to become the most popular target-date vehicle by year-end 2024.


Investors Continued to Pour Money Into the Lowest-Cost Options

This trend of investors preferring the lowest-cost options gathered momentum in 2023. Every target-date mutual fund fee quintile saw outflows except the cheapest—which had about $80 billion in inflows.

In fact, the cheapest quintile’s net flows increased from $54.4 billion in 2022 and $59.2 billion in 2021. Target-date mutual funds in the four more expensive quintiles saw $28.2 billion in outflows.


Fees Remained on a Downward Trend

Investors are now paying less. Over the past decade, the average target-date funds’ prospectus net expense ratio weighted by year-end assets has fallen. While they’ve chosen lower-cost options, firms have also cut fees. Lower fees mean even more savings for investors.

Overall, expenses have nearly halved over the last decade and fee drops will get smaller as they continue their downward trend. CIT fee data isn’t as transparent and therefore isn’t included, but anecdotal evidence indicates CITs would lower the average asset-weighted fee.


The Importance of the Glide Path

Target-date glide paths play an important role in performance. Differing equity and fixed-income allocations can lead to unique outcomes for investors, particularly as they near retirement or are in retirement.

Each series’ landing point serves as a key differentiator. Series with a “to” glide path lower their equity allocation until they reach retirement, at which point they convert into a “retirement” fund and remain constant. Those that implement a “through” glide path continue to lower their equity stake past the target retirement. Given “through” glide paths have a further landing point than the “to” peers, they typically have a higher equity allocation at retirement, which investors should be comfortable with prior to investing. 


Multiple Portfolio Construction Options Lead to Similar Returns

By swapping actively managed underlying funds for index trackers, providers can offer the same glide paths with cheaper building blocks and lower overall costs. Some providers also offer options that blend active and passive components.

The charts below show the median returns of 2025 and 2055 target-date vintages from a sample group of providers with underlying active, passive, and blend options using the same glide path. On a total return basis, active options don't show much of an advantage over passive and blend, largely because of higher costs.


Differentiate Your Business

Retirement planning looks different for every investor. When asset managers are informed about the industry landscape and popular retirement vehicles like target-date strategies, it can be easier to deliver comprehensive options.

Morningstar’s Personal Target-Date Fund Services helps you provide a target-date offering that’s more tailored to your clients. The platform uses individual participant data points—like a participant’s age, income, account balance, and contribution rate—to build a strategy that suits your investor’s retirement goals.

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