Business reasons and changing market dynamics have caused Fidelity to get more aggressive in the equity allocation for their estimated $175 billion in TDF funds. RIABiz reporter Brooke Southall outlines the reasons why Fidelity may be making these changes, including research establishing that investors are more willing to accept risk and the fact that they are living longer and investing sooner.
But there may be more practical business reasons behind the move, including the fact that Fidelity has lost out with its more conservative approach to its biggest TDFs rivals, Vanguard and T Rowe Price, as measured by in-flows and performance. Others suggest that Fidelity will make more money with its more aggressive allocation of equities.
But did investors stay the course because of inertia or because they made a calculated decision? Some experts like Robert Arnott of Research Affiliates argue that going conservative as people approach retirement — when their account balances are largest — is exactly the wrong strategy. If the definition of retirement is changing, with people living longer and making transitions rather than stopping working, shouldn’t a TDF — or a managed solution, for that matter — take that into account?
