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Saturday, October 31, 2009

As I Have Said Before I'm No Fan of Target Date Funds....

and it seems that I am not alone WSJ on a new senate report which found (surprise) high fees,low levels of disclosure and conflicts of interest my bolds


Target Date' Funds Get Senate Scrutiny



By DAISY MAXEY

A Senate committee report identified three main concerns with "target date" funds: lack of disclosure and consistency in their design; excessive fees; and conflicts of interest.

It also raised the possibility of greater regulatory oversight of the funds....



The committee found that the date in the name of target-date funds isn't consistent with their design, making them difficult for investors to evaluate and compare, and that asset allocation varies among funds with the same dates. It also found that in addition to varying expense ratios within the funds, pension-plan service providers or the various outside companies also may charge fees that are deducted from an individual's savings.

The report also raised issues about possible conflicts of interest. Plan sponsors generally don't have a choice in selecting underlying funds, and instead choose from a portfolio of proprietary funds typically constructed by the firm, the report said. "As a result, some investment firms may include low-performing funds in their portfolio in an effort to garner more assets," it said....



The SEC's Division of Investment Management is focusing on fund names and sales materials, Mr. Donahue said. The simplicity of marketing messages "at times belies the fact that target-date fund managers have adopted very different asset-allocation strategies, and that investments that are appropriate for an investor depend not only on his or her retirement date, but on other factors."

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