Product Strategy Compass Article Room for Growth in the Booming Target-Date Fund Market

Target-Date Fund Market Continues Its Ascendancy

As one of the most popular and dominant vehicles for retirement investing, target-date mutual funds continue to grow and show no signs of slowing down. Assets in target-date funds reached an all-time high of $985 billion as of June 30, 2017, up from $880 billion at the end of 2016 – due to both positive investment returns and net inflows. Target-date funds received a whopping 45% of all 401(k) inflows in June 2017, compared with 19% in large US equity funds and 8% in international funds. It is estimated that by 2020, target-date funds will capture roughly 90% of all new 401(k) contributions.

The immense growth in the field is primarily because target-date funds are the default investment choice of most 401(k) plans. In 2016, 88.2% of plans used a target-date fund as their default investment option, up from an already impressive 85.5% in 2015.

With such big money at stake, asset managers are eager to attract some of this massive growth. But the immense popularity of target-date funds also poses a distinct challenge for asset managers who may wonder how to distinguish themselves in such a crowded field...

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