The Global Financial Crisis and the Performance of Target-Date Funds in the United States

8 Pages Posted: 1 Oct 2011

See all articles by Laurence David Booth

Laurence David Booth

University of Toronto - Rotman School of Management

Bin Chang

University of Ontario Institute of Technology

Date Written: September 21, 2011

Abstract

We analyze asset allocations and performance of target-date funds in the United States from 2006 to May 2009. The good news is that the performance of target-date funds is consistent with greater risk and better performance for longer dated funds. The bad news is that on average, target-date funds invested 75% in common equity, which generated average losses of over 30% in 2008. The most striking result is that the 2010 date funds significantly increased their common equity exposure in 2007, immediately before the stock market crash of 2008, resulting in significant losses for investors planning to retire in 2010.

Keywords: Defined Contribution Plan, Pension Fund, Target-Date Fund

Suggested Citation

Booth, Laurence David and Chang, Bin, The Global Financial Crisis and the Performance of Target-Date Funds in the United States (September 21, 2011). Rotman International Journal of Pension Management, Vol. 4, No. 2, p. 46, Fall 2011, Rotman School of Management Working Paper No. 1936012, Available at SSRN: https://ssrn.com/abstract=1936012

Laurence David Booth (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Bin Chang

University of Ontario Institute of Technology ( email )

2000 Simcoe Street North
Oshawa, Ontario M5J2N3
Canada

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