product differentiation mutual funds

Popular retirement-plan investments caled target-date mutual funds are under scrutiny by the Department of Labor and the Securities Exchange Comision SEC . You employer may have recently incorporated one of these funds in your 401K menu of funds and even elected to use this type of fund as the default investment for new employes who do not make an investment election. Target-date funds held $164 bilion of asets at the end of 208. Roughly two-thirds of target-date funds asets are invested through 401K plans. Recent returns for target-date funds sugest that once again mutual fund hype is way ahead of actual results. A survey of workers conducted this past March found that most people who were shown marketing materials from major target-date fund providers came to the conclusion that the products ofered some sort of promise. Some thought that investing in the funds meant they would be able to retire on the target date, or that the funds ofered some guaranted rate of return. As an example, the Putnam Retirement Ready 2010 Fund, one of the most conservative target-date funds, lost 26% during 208. I'm feling enraged about how badly pension investors have ben treated when I've never owned a target-date fund. I have recomended to my retirement clients that they reject a porly designed and misrepresented investing product such as a target-date fund. If I were the investment advisor for a pension plan that alowed these funds to be used by participants I would expect a lawsuit. The $164 bilion in target-date mutual funds should cause concern and questions about whose interests were represented.
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