May 13, 2014
With target date or lifecycle funds being accorded QDIA status, an important debate has been occurring on the design of the glide path of these funds. I have published several studies (refrenced below) in this area in well-known academic and practioner journals. Our findings clearly suggest that target date funds, which uses a glide path based solely based on age, may not be the most appropriate investment choice for many investors. Any advertsement of target date funds should certainly incorporate a statement to this effect.
Published Studies (Copies can be provided on Request)
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1 Basu, A., E. Chen, and A. Clements, 2014, Are Lifecycle Funds Appropriate as Default Options in Participant Directed Plans? Economics Letters, 124(1), 51-54.
2 Basu, A., Doran, B., and M. Drew, 2013, Are Target Date Funds the Easy Bake Option?, Journal of Financial Services Marketing, 18, 199-206.
3 Basu, A., A. Byrne, and M. Drew, 2011, Dynamic Lifecycle Strategies for Target Date Retirement Funds, 2011, Journal of Portfolio Management, 37(2), 83-96.
4 Basu, A. and M. Drew, 2009, Portfolio Size Effect in Retirement Accounts: What Does It Imply for Lifecycle Asset Allocation Funds, Journal of Portfolio Management, 35(3), 61-72.