A recent analysis by Morningstar indicates that target-date fund flows are favoring passive strategies. Have those trends impacted NAPA Net readers?
Roughly 43% of respondents to this week’s reader poll say they currently recommend three to five TDFs, with the remaining 57% split between those who recommend one to three and a single family. And for nearly three-quarters (71%), that was pretty much the same as five years ago.
Now flows are one thing – and recommendations another – but only 15% of this week’s respondents have shifted to all passive TDFs, and just as many say that none of the options they recommend are passive. The rest noted that some of the ones they recommend are passive, but not all – and, as the comments above suggest, that’s pretty much the same as five years ago.
As for the change that is afoot, most (71%) cited fees, followed by:
- client interest (57%);
- glide path (46%);
- performance (43%); and
- litigation concerns (16%).
Asked to narrow that list of influences down to one, just over half (57%) cited fees, followed distantly by the 28% who cited performance. The remaining 15% split between litigation concerns and client interest.
That said, the trend, if indeed there is one, might be getting ready to reverse course. One reader commented: “We are generally moving away from indexed TDFs to a blend or active strategy.”
Yet another said, “I try to steer clear of, or ahead of investment ‘trends’... They do not usually end well. No single choice is best for everyone, so picking passive over active just because it is popular, or out of fear, is not the answer.”
Thanks to everyone who participated in our weekly NAPA Net reader poll!
