2011•Rotman International Journal of Pension ManagementRequires access

The Global Financial Crisis and the Performance of Target-Date Funds in the United States

Bin Chang, Laurence Booth

Abstract

We analyze asset allocations and performance of target-date funds in the United States from 2006 to May 2009. The good news is that the performance of target-date funds is consistent with greater risk and better performance for longer-dated funds. The bad news is that on average, target-date funds invested 75% in common equity, which generated average losses of over 30% in 2008. The most striking result is that the 2010 date funds significantly increased their common equity exposure in 2007, immediately before the stock market crash of 2008, resulting in significant losses for investors planning to retire in 2010.

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Key concepts: Equity (law), Business, Global assets under management, Finance, Stock market crash, Financial crisis, Stock (firearms), Federal funds