A look back on the target date landscape in 2022
April 2023
Key Observations
• Target date offerings continued to garner the lion’s share of defined contribution assets and are now estimated to make up 50% of 401(k) plan assets.
• While the majority of cash flows into target date funds continues toward passive providers, a recent uptick in litigation targeting passive target date could have an impact.
• 2022 involved a number of target providers increasing their strategic equity glidepath, a trend that has been persistent for a decade.
• CIT vehicles have seen increased interest in a defined contribution menu and the target date space has not been immune to this.
What A Year!
As we look back on calendar year 2022, there are a myriad of topics that might be discussed in a market review for the year. While the focus for many investors and Plan Sponsors has been on the market sell-off, heightened volatility of equity and bond markets, rising and persistent inflation and the Fed’s relentless approach to raising interest rates, there have also been a flurry of updates across target date providers and landscape.
Since the time of that writing in 2017, the interest and utilization by Plan Sponsors and participants in target date solutions has exploded, and today these solutions make up approximately half of all assets within defined contribution plans. While balanced funds and managed accounts are the other eligible investments that qualify as QDIA eligible, approximately 86% of all plans use target dates as their QDIA.1 Target date funds continue to garner assets due to their ease of use for participants, their continued fee compression in recent years and their objective to provide a managed solution for participants that will allocate appropriately based on a participant’s age.
