According to the study conducted by data provider BrightScope, target-date funds experienced a 20% growth in assets to US$503 billion, during 2012, as more companies encouraged employees to funnel money into these all-in-one retirement vehicles.
At the end of 2012, target-date funds held more than US$503 billion, boosted by a higher stock market, reported BrightScope.
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BrightScope’s study data provides new evidence that competition between fund families is driving prices down and forcing companies to offer more choices to retirement plan participants.
Target-date funds pool money from investors who plan to retire and their expense ratios average 0.70%, which was decreased by 0.02% point in 2012.
According to BrightScope, target-date funds are ranked by risk-adjusted performance and other factors. Among all, American Century, JPMorgan SmartRetirement and MFS-branded funds received top scores.
Brooks Herman, head of data and research at San Diego, California-based BrightScope, said: "Funds offered by Putnam Investments, a subsidiary of Great-West Lifeco slipped by two grades to a 3, as their stock holdings under-performed the benchmark."
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By GlobalDataThe percentage of closed-architecture fund providers, who don’t allow investments in funds by other companies declined to 58% in 2012, down from 68% in 2011, BrightScope reported.
The study revealed that the number of fund families offering target-date funds decreased to 48 in 2012 from 50 in 2011.
"Employers’ consistent month-to-month investments in the plans deliver streams of cash into the hands of asset managers in good and bad markets, thus making it an appealing place to be for fund providers," Herman added.
