TDF assets surpass $600 billion, Morningstar saysNews added by Benefits Pro on July 2, 2014

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By Chuck Epstein

Growth in target-date mutual fund assets has leveled off in recent years, but organic growth of 10.5 percent last year helped TD assets cross the $600 billion asset threshold, according to a new Morningstar report.

In the first quarter of 2014, an additional $18 billion in new assets flowed into the funds.

Coupled with market appreciation, total assets were more than $650 billion as of March 31. Flows into TDFs amounted to nearly a third of the firms’ new assets, growth that has allowed costs to fall for the fifth year in a row since Morningstar began assessing the industry.

“The target-date industry is maturing and stabilizing, but these funds continue to upend expectations in more ways than one,” Janet Yang, Morningstar's target-date series strategist and lead author of the study, said.

While assets continue to build, the report noted baby boomers have started to withdraw their assets from TDFs. TDFs in the 2000-2010 category saw withdrawals of about $2.7 billion in 2013. “Look for these figures, as well as those of other nearer-dated funds, to climb as more baby boomers tap their target-date assets in the coming years,” the report predicted.

The report also found that the Fidelity Freedom Index Series is now the lowest-cost family of target-date funds, replacing The Vanguard Target Retirement Series. At year-end 2013, the Vanguard series had an asset-weighted fee of 0.17 percent compared with 0.16 percent for Fidelity Freedom Index.

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