Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced findings from its Target-Date Series Research Paper: 2013 Industry Survey. Key findings of the industry survey are:
Josh Charlson, Morningstar's fund-of-funds strategist and the study's lead author, said, "We found that target-date funds with significantly different asset allocations deliver similar retirement savings outcomes up to age 85. And as the target-date industry matures, we see an increase in diversification of the underlying investments in terms of both fund strategy and geographical location. Though the asset allocation or fund selection among target-date investments vary, target-date funds are relatively suitable investments for retirement savings. Investors realize that, too, and continue to put their money in these funds."
Using Monte Carlo analysis, which simulates thousands of possible allocations that a glide path could take, Morningstar tested the likelihood that investors will be able to successfully retire. Morningstar defined success as whether or not an investor's savings would last through retirement. The test used a uniform set of inputs along with a hypothetical scenario of an average U.S. investor, based on common assumptions of salary, savings rate, and expected retirement age. Morningstar compared glide paths that shift their asset allocation "to retirement"--when a target-date fund discontinues asset allocation adjustments when the retirement date is reached--and those that continue to shift "through retirement"--when a target-date fund continues to shift its allocation more conservatively after the retirement date is reached. The research concluded that target-date investors in different series have similar probabilities of accumulating sufficient savings, at least through age 85.
Additional findings from the industry survey include:
Morningstar also publishes Morningstar Analyst Ratings(TM) and reports for the largest target-date series. The company determines an Analyst Rating for target-date series by evaluating five key pillars--Process, Price, Performance, People, and Parent--in addition to unique quantitative metrics. The ratings are assigned on a five-tier scale: Gold, Silver, Bronze, Neutral, and Negative. The top three tiers represent positive ratings. Morningstar's Analyst Ratings and in-depth reports for target-date series are available in global investment analysis platform Morningstar Direct(SM) and investment planning and research platforms Morningstar Office(SM) and Morningstar® Advisor Workstation(SM). The Analyst Ratings and one-page reports for target-date series are available on individual investor website Morningstar.com®.