S&P Launches Industry's First Target Date Scorecard; Compares Target Date Fund Returns Versus Relative S&P Target Date Benchmark

Mar 10, 2011, 09:30 ET from Standard & Poor's

NEW YORK, March 10, 2011 /PRNewswire/ -- Standard & Poor's, the world's leading index provider and publisher of the widely followed Standard & Poor's Index Versus Active Fund ("SPIVA") scorecard series, announced today that it has launched the industry's first comprehensive, periodic scorecard for target date mutual funds. The S&P Indices Target Date Scorecard provides performance comparisons, equal- and asset-weighted peer averages, and volatility comparisons for U.S. target date funds versus their relative S&P Target Date Index.

The S&P Target Date Index Series is comprised of nine multi-asset class indices, each corresponding to a particular target retirement date. The nine multi-asset classes include U.S. large cap, U.S. mid cap, U.S. small cap, international equities, emerging markets, U.S. REITs, core fixed income, short term treasuries, and TIPS.

Target date is a rapidly growing investment category and is particularly important in the defined contribution ("DC") retirement plan market, which accounts for over two-thirds of target date assets. The latest figures available from the Investment Company Institute ("ICI") for Q3 2010 put total assets in target date mutual funds at $306 billion, up from $232 billion in Q3 2009.

The S&P Target Date Scorecard shows that asset class exposure varies significantly among target date funds, which play out in the variance of fund returns. For example, 3-year annualized returns for funds in the 2015 category ranged from -6.8% to 2.6%, with the comparable benchmark returning 1.37% per year.

Data through December 31, 2010 also reveals that in the 1-, 3- and 5-year periods, the average returns of further dated target date funds generally lagged their relative S&P target date benchmark. The picture, according to the scorecard, is more mixed for closer-dated funds. Additionally, asset-weighted average returns for target date funds in each peer group tend to be somewhat higher than equal-weighted returns, indicating that the larger target date funds performed somewhat better than their smaller counterparts.

"Target date funds provide DC plan sponsors with a convenient way to offer professional money management, portfolio diversification and dynamic asset allocation in a single investment vehicle," says Phil Murphy, Vice President of Defined Contribution at S&P Indices. "In principle, target date funds are straightforward; however, plans are well-advised to fully understand how these products work and how each employs their selected target date strategy. One useful tool in doing so is the S&P Target Date Scorecard, which is the first to provide reporting on active target date fund performance versus their relative S&P Target Date Index."

A table detailing the percentage of funds outperformed by their relative S&P target date benchmark index can be found at the conclusion of this press release.  

The S&P Target Date Scorecard is published semi-annually with a four to six week lag following year-end and the first six months of the year. The underlying data is obtained from Lipper U.S. Fund Database. For more details on the scorecard, please visit: www.spiva.standardandpoors.com or www.spindices.com/targetdate, Standard & Poor's micro site dedicated to defined contribution plan sponsor.

Table 1: Percentage of Target Date Funds Outperformed by Benchmark

Category

Comparison Index

One

Year (%)

Three

Year (%)

Five

Year (%)

Ret Income Funds

S&P Target Date Retirement Income

62.86

39.13

57.89

Target 2010 Funds

S&P Target Date 2010

53.33

58.33

69.23

Target 2015 Funds

S&P Target Date 2015

56.25

77.27

81.82

Target 2020 Funds

S&P Target Date 2020

74.36

93.10

87.50

Target 2025 Funds

S&P Target Date 2025

71.43

77.78

77.78

Target 2030 Funds

S&P Target Date 2030

74.36

86.21

87.50

Target 2035 Funds

S&P Target Date 2035

74.07

72.22

77.78

Target 2040 Funds

S&P Target Date 2040

77.50

76.67

84.21

Target 2045+ Funds

S&P Target Date 2045+

75.41

66.67

57.14


Source: Standard & Poor's, Lipper. For periods ending December 31, 2010. Past performance is not a guarantee of future results.



About S&P Indices

S&P Indices, the world's leading index provider, maintains a wide variety of investable and benchmark indices to meet an array of investor needs. Over $1.25 trillion is directly indexed to Standard & Poor's family of indices, which includes the S&P 500, the world's most followed stock market index, the S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, the S&P Global BMI, an index with approximately 11,000 constituents, the S&P GSCI, the industry's most closely watched commodities index, and the S&P National AMT-Free Municipal Bond Index, the premier investable index for U.S. municipal bonds. For more information, please visit www.standardandpoors.com/indices.

About S&P Target Date Indices

S&P Indices' target date benchmark series extends traditional representative indexing into the growing target date fund universe by establishing a new method for defining market consensus. For each target date, asset class allocations are drawn from a survey of publicly available target date glide paths from major asset managers. This representative indexing provides a fair and independent proxy of the market consensus in the target date universe. For more information, go to http://www.spindices.com/targetdate.

SOURCE Standard & Poor's



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