Callan Target Date Index
Index Performance
Glidepath Allocation
Equity Rolldown
Methodology
First Quarter 2013
The Callan Target Date Index started off the year strong, posting a first quarter return of 4.7% across target date vintages, with individual target date series’ quarterly performance ranging as high as 5.5% and as low as 3.8%. The performance reflects an impressive showing by domestic equities - the S&P 500 returned 10.6% during the quarter and the Dow Jones Wilshire 4500 was up 12.9%. The average equity allocation across target date fund vintages is just over 50%, according to the Index.
While target date fund diversification has improved over the past few years, domestic equities continue to dominate the equity portion of the glidepath, with the far dated vintages sporting more than 50% in domestic equities alone.
For the third consecutive quarter, the Index modestly underperformed the median target date fund manager, in this case by 32 basis points. The Index generally trailed the median manager for near dated funds (2010, 2015), while besting the median manager’s far dated funds (2045, 2050). The Index returned 2.5% across Retirement Income vintages and 7.3% across long-date (2050) vintages. Over the five-year period, managers struggled to best the Index, returning a mere 4 basis points more annually after fees.
Index Performance
The Callan Target Date Index - Average of All Vintages chart gives a snapshot of the performance of the Callan Target Date Index. We show the aggregate performance of the universe of target date funds at a glance by equally weighting every “vintage” within the target date fund glidepath (e.g., 2015, 2020, 2025, etc.). The charts also shows the range of performance of the Callan Target Date Index members, similarly weighted. Use the drop-down box above to select and view the performance of each vintage within the Callan Target Date Index.
Glidepath Allocation
The Callan Target Date Index Asset Allocation chart provides insight into the underlying asset class composition of the Callan Target Date Index over the full asset allocation glidepath. Multiple views offer varying degrees of detail into asset allocation. The Macro Level View depicts the allocation over the course of the Index's glidepath (40 years before retirement and 20 years after retirement) across nine major asset classes. The Micro Level Views show the allocation over the course of the Index's glidepath broken out into much more granular asset classes with options to examine equity and non-equity asset classes separately.
Equity Rolldown
The Equity Rolldown Analysis chart displays the Callan Target Date Index’s equity allocation (excluding commodities and REITs) across the full asset allocation glidepath, including 40 years prior to and 20 years after retirement. The full range of equity rolldowns across all funds in the Callan Consensus Target Date Index is represented in grey.
Methodology
To accurately benchmark a target date fund it is essential to determine an appropriate target date fund index. Many current target date indices simulate capital markets and derive an artificial glidepath to create a suite of target date indices. This approach could be labeled biased or subjective – or even worse, arbitrary – because it does not objectively represent the target date opportunity set. After all, if a given target date fund’s performance differs from such an index, what does that really signify that is meaningful from an evaluation perspective? To avoid this problem, Callan constructed a consensus glidepath that is driven by the actual glidepaths offered within the industry. Please see the Target Date Fund Index Primer for a summary of the major target date indexes.