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Plan Insight

NOVEMBER 2010 Newsletter

Morningstar Update - Target-Date Funds

As a result of a 3rd Quarter 2010 turnaround in equity returns, as well as continued positive performance in the fixed-income market, target maturity funds strolled into the fourth quarter on a positive note, according to a Morningstar report.

For the quarter, the average target maturity fund returned just over 10%, slightly less than the 11.3% of the S&P 500 Index but significantly above the 2.5% of the BarCap U.S. Aggregate Bond Index. The weighted average return of the 13 indexes that collectively form the Morningstar Lifetime Moderate Index family fell between the target maturity fund average and the S&P 500 index with a 10.8% return.

These strong returns were especially welcome after the second quarter when the funds and indexes declined more than 7% on average, Morningstar said. For the 12-month period ending September 30, 2010, performance for each metric was similarly strong, falling between 9.3% and 10.4%.

Although all asset class returns were positive during this period, those funds with higher allocations to equities, particularly to non-U.S. developed equities, commodities, and real estate tended to be the top performers.

The returns for all of the indexes in the Morningstar Lifetime Allocation Index family were positive over the past three months, with even the most conservative indexes having returns above 4% while the most aggressive topped a 13% return, Morningstar said.

Over the past year, the range of returns was tighter with the most conservative indexes returning just less than 8% and the most aggressive indexes returning just over 11%. The top two performing equity asset classes this quarter were emerging markets equity and non-U.S. developed equity as the dollar weakened, supporting non-dollar denominated assets. Within fixed income, all asset classes were positive as well (both the third quarter return and 12-month standard deviation were slightly higher than 0% for cash but show as 0.0% due to rounding).

The 12-month returns for all asset classes were also in positive territory. REITs continued to be the biggest winner over this period with a stellar 30% return, while emerging markets equity was also a top performer with more than a 20% gain.

Within the United States, growth outperformed value and small cap outperformed large cap during this time. High-yield bonds continue to perform similar to equities.

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This page was last reviewed and/or updated on Friday, July 03, 2015 05:21 PM


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