Morningstar examines how target date funds evolved in 2018 as investors favored cheaper collective investment trusts and passive strategies. The paper highlights intensifying fee competition, Vanguard’s roughly 40% market share, and why lower costs alone did not consistently translate into stronger performance across fund offerings.
2018 Target-Date Fund Landscape: Sizing Up the Trillion-Dollar, Increasingly Passive Giant
Morningstar
Jeff Holt, Heather Larsen
Research
61 Pages
Key Takeaways
CIT Adoption Accelerates: Target date CIT assets reached roughly $660 billion in 2018, increasing about $30 billion despite negative market returns during the year.
Passive Flows Dominate: Nearly all $55 billion of estimated 2018 net inflows went into low cost series holding more than 80% of assets in index funds.
Fees Aren’t Everything: Among 10 lower fee target date series replicating legacy offerings, 3 underperformed their higher cost counterparts since inception.
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