The problem with target date funds

I wasn’t a fan of target-date funds when the markets crashed in 2008 because there was no consistency of investment objectives and equity-fixed income mix between target-date funds for a specific year among different fund companies.

People who thought a 2010 or 2015 fund would have more fixed-income investments were in for a big of a shock based on the fund they were in. Funds also had different glide paths. It’s like buying diet sodas where some had a lot more calories than zero and there wasn’t any regulation that had labeling requirements where a 2025 target-date fund had a consistent equity-fixed income split among the fund companies.

Also, I have concerns over investment education because I’m sure there are countless participants out there that invest in target-date funds, as well as other funds in their investment selections, which defeats the purpose of the target date funds. Also, I’ve seen a major uptick in litigation against larger plans over proprietary target-date funds. With asset allocation funds and managed accounts available, I don’t know if target-date funds offer any type of value to both plan fiduciaries and plan participants.

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