By Emile Hallez March 11, 2019
A volatile market across equity and fixed-income asset classes during the year in some instances favored low-fee target-date funds, particularly index-based series. In some cases, fund firms that have multiple products saw their index-based target-dates outperform their active ones.
However, some active-only managers also ranked among the top performers, as average total returns had more to do with glide path design and asset class exposure, says Jeff Holt, director of multi-asset and alternative strategies in Morningstar’s manager research practice.
“It shows that you have to look beyond active versus passive when evaluating target-date fund performance,” Holt says. Further, because target-date managers have their own glide paths and asset class mixes, “there isn’t really a truly passive target-date series. They all look different.”
On average during 2018, target-date mutual fund and collective investment trust series built primarily with index funds and ETFs outperformed those investing in active funds, according to a recent report from Sway Research.
In 2018, funds in Axa’s 1290 Retirement series on average performed in the top 5% of U.S. target-date mutual funds, according to Morningstar data showing rankings based on average returns across funds and share classes on a non-asset-weighted basis.
Natixis’s Sustainable Future series had the second-highest average performance. During the product’s first full year of operations, its funds, on average, were in the top 7%.