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State Street Target Retirement Series

This target-date series enjoys durable advantages.

The following is our latest Fund Analyst Report for State Street Target Retirement series.

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Seasoned contributors oversee the design and execution of State Street’s Target Retirement series, tapping the firm’s deep research capabilities to create a competitively priced and thoughtfully diversified series. Of the two share classes on offer, the cheaper K share class receives a Morningstar Analyst Rating of Silver and the more expensive I share class is rated Bronze.

The glide path starts off with a 90% allocation to equities that is maintained across the four vintages farthest from retirement, after which the equity allocation decreases more gradually than that of peers. At retirement, the series carries a 44% equity allocation, in line with its typical peer, which continues to taper, ultimately plateauing at 35% around age 70.

This broad glide-path structure historically exhibits stability, but it isn’t inert. The firm takes opportunities to implement evolving research views and enhance the series along the edges. For example, in 2020, the team exchanged its broad-based Treasury Inflation-Protected Securities exposure for shorter-term TIPS, reflecting concerns around impending economic inflation. In 2021, this group also reduced portfolio duration by reallocating a portion of its long-term U.S. Treasuries to intermediate-term U.S. Treasuries. These changes are sensible and demonstrate a commitment to improvement, but their scarcity also indicates that the effectiveness of the series relies heavily on its strategic design rather than deft allocation moves.

State Street populates its series with a dozen in-house passive funds in total and takes a more granular approach to asset allocation than its typical peer. For instance, this series employs three funds to deliberately arrange U.S. large-cap, mid- to small-cap, and international equity exposure. Roughly 10 years before retirement, the glide path introduces an allocation to inflation-hedging securities via intermediate-term TIPS and REITs.

Continuity among seasoned contributors, a team-based approach (including a seven-person committee overseeing the glide path), and robust supporting groups shield this series from the effects of broader turnover at the firm.

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About the Author

Karen Zaya

Senior Analyst
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Karen Zaya, Ph.D., is a senior manager research analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She covers multi-asset and alternatives strategies.

Before joining Morningstar in 2021, Zaya taught at Hunter College, and before that she was a postdoctoral assistant professor at the University of Michigan, where she conducted research in mathematical fluid dynamics and taught undergraduate courses.

Zaya holds a doctorate degree in mathematics from the University of Illinois at Chicago.

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