State Street Target Retirement Series

Experienced leaders of robust groups use deep research to construct the State Street Target Retirement series. This low-cost offering earns a Morningstar Analyst Rating of Silver for the cheapest shares, while the pricier ones (including the new R3 shares) earn Bronze ratings.

Continuity among leadership and a team-based approach (including a seven-person committee overseeing asset allocation and glide path design) shield this series from the effects of broader turnover at the firm. Seamus Quinn replaced Chuck McGinn as a named portfolio manager in April 2022 after five years on the team. He joins continuing portfolio manager Mike Narkiewicz.

The glide path maintains a 90% allocation to equities until 30 years from retirement, after which the equity allocation decreases more gradually than that of peers. At retirement, the through glide path carries a 44% equity allocation (in line with its typical peer), which continues to taper, ultimately plateauing at 35% around age 70. The broad glide path structure historically has been stable, but the firm implements evolving research views and enhances the series along the edges. Changes have been sensible and proved to be beneficial, like in early 2022 when interest rates did rise. For example, in March 2021, the team reduced duration (a measure of interest-rate risk) by reallocating roughly a third of the long-term U.S. Treasuries allocation to intermediate-term U.S. Treasuries in anticipation of rising interest rates. Prior to the change, the 2035-2065 vintages ranked in their respective worst-performing deciles during 2021′s first-quarter interest-rate pressure, but those same vintages ranked around the middle of their packs in 2022′s first quarter amid soaring interest rates in the face of persistent inflation.

Some structural positions weighed on recent performance, including exposure to small- and mid-cap domestic equities, international stocks, and long-term U.S. government bonds. The vintages furthest from retirement are especially vulnerable when interest rates rise and stocks fall in tandem, which manifested in early 2022. However, long government bonds can provide a ballast when equity markets slump, like in early 2020.

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