The SEC has proposed rule amendments to help clarify the use of target date funds, which are typically tied to a date an investor is set to retire.
The rule changes proposed would enable investors to better assess the anticipated investment glide path and risk profile of a target date fund by requiring graphic depictions of asset allocations in fund advertisements, for example. The rules also would require an asset allocation tag line adjacent to a target date fund's name and advertisement.
Funds that had a target date of 2010 averaged a nearly 24% loss, according to the SEC. The losses for 2010 funds ranged between approximately nine and 41%. In 2009, the returns continued to vary widely for 2010 funds, ranging between approximately seven and 31%, with an average return of approximately 22%. Since their launch in the mid-1990s, target date funds registered with the SEC total approximately $270 billion.
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