Target date funds have become popular in recent years because they offer one-stop shopping for managing the asset allocation challenge. If you’re retiring in, say, 2030, you can buy a target date fund to oversee your asset allocation with your retirement date in mind.
But as today’s episode of The Inside View reminds, not all target date funds are created equal and so there’s design risk to consider when choosing among these products. The critical variable in target date funds is the underlying index that governs the fund’s strategy. As such, the design and management of the benchmark determines much of the success, or failure, for any given target date fund.
Today’s guest, veteran investment consultant Ron Surz, knows a thing or two about how to build and analyze investment indices. His firm PPCA Inc. designs and sells a sophisticated suite of software tools for analyzing portfolios and investment indices. Ron is also president of Target Date Analytics, a consulting and research firm that designs target date fund indices, which are used by the SMART Funds Target Date Series.
As Ron explains in today’s episode of The Inside View, index design is fate for target date funds. Unfortunately, not every target date fund is looking at a rosy future. One problem, he says, is a lack of a sound methodology for some target date benchmarks…

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