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Morningstar's Target-Date Strategy Landscape Report Finds Investors Stayed the Course Despite Market Volatility in 2022
CHICAGO, March 28, 2023 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today published its annual
About this update from Morningstar, Inc.
[{"type":"text","content":"CHICAGO, March 28, 2023 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today published its annual Target-Date Strategy Landscape Report, which found that in 2022 target-date strategies had $153 billion of net inflows, of which $121 billion—or 79%—went into collective investment trusts (CITs).\n\"Despite last year's market turbulence, target-date strategies saw considerable inflows, especially into collective investment trusts,\" said Megan Pacholok, senior manager research analyst at Morningstar. \"To see target-date investors largely stay the course through the down market is a sign that these strategies are being used as intended—as long-term investments.\"\nThe 2023 report examines the latest trends across the target-date industry, including the target-date series that are gathering the most inflows, the ongoing adoption of CITs as plan sponsors' preferred vehicle, and the continued critical role fees play when selecting a series.\nThe Target-Date Strategy Landscape Report is available here. Key findings from the report include:\nTotal target-date assets fell to $2.82 trillion in 2022 from its record high of $3.27 trillion in 2021. Market depreciation drove the approximate 14% drop.CITs are on pace to overtake mutual funds as the most popular target-date vehicle in the next two years. These vehicles account for 47% of all target-date strategy assets as of the end of 2022.The opportunity for environmental, social, and governance (ESG) target-date series has broadened, as the Department of Labor modified its guidance to allow ESG-focused strategies to serve as a qualified default investment option.Fees continue to influence target-date fund flows and investors prefer lower-cost options. The two cheapest quintiles of target-date share classes amassed $60 billion in 2022, and the three most expensive quintiles posted $28.5 billion in outflows.Vanguard Target Retirement collected the most net new money in 2022 when accounting for both mutual fund and CIT flows. At the end of 2022, 51% of Vanguard's target-date assets were in CITs, marking the first time it surpassed the mutual fund version in assets.Plan sponsors faced litigation around performance in 2022. The lawsuits compared series to a small peer group of the best performers, which could potentially lead plan sponsors ...