Callan Target Date Index™

This index allows plan sponsors, managers, and participants to track the performance and asset allocation of available target date mutual funds and collective trusts.

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.

Use the drop-down menu to the right to see the different views.

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 range in grey shows each target date vintage’s equity exposure at the 10th and 90th percentile across the full glidepath.

Simply hover over the various lines in the chart to see the equity exposure for each vintage year.

Target Date Performance Snapshot

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.

Click on the various vintage years to see the performance over time.

Index Performance as of March 31, 2019

Average of All Vintages

Average of All Vintages

Retirement Income

Retirement Income

2010

2010

2015

2015

2020

2020

2025

2025

2030

2030

2035

2035

2040

2040

2045

2045

2050

2050

2055

2055

First Quarter Performance Overview

The Callan Target Date Index™ gained 2.9% in the first quarter, bringing the Index’s trailing one-year return to 11.9%. The median target date fund (TDF) manager outperformed the Index for the quarter, posting a 3.1% return, and over the last year, gaining 12.4%. At this point last year, the Index had a higher trailing one-year return than the median TDF manager, but this trend has reversed.

This shift is consistent with the longer-term trend, as the median manager’s return over the last five years (8.6%) is 30 basis points above the Index’s return (8.3%).

The spread between the best and worst managers narrowed during the quarter, as the 10th percentile manager gained 3.5% while the 90th percentile manager gained 2.6%. The one-year spread for managers was 4.4 percentage points.

TDFs benefited greatly from exposure to U.S. large-cap equity, with the S&P 500 gaining a healthy 13.7% as market confidence rose following improving trade sentiment and a pause in rate hikes announced by the Fed. Similarly, non-U.S. and emerging market equity posted strong, albeit slightly smaller, returns, as the MSCI ACWI ex USA Index gained 10.3%, and the MSCI Emerging Markets Index gained 9.9%. Fixed income also experienced gains, with the Bloomberg Barclays US Aggregate Bond Index increasing 2.9%.

Long-dated vintages outperformed near-dated vintages during the quarter, attributable to strong equity returns coupled with long-dated vintages’ greater equity allocations. The median 2015 TDF rose 2.3% while the median 2050 TDF gained 3.8%. The spread in returns is even more magnified when examining one-year performance, as the median 2050 TDF’s gain of 16.7% nearly doubles that of the median 2015 TDF (8.4%).

Expense Ratio

The Expense Ratio Analysis shows the distribution of expense ratios for funds within the Target Date Index. The group includes the lowest fee share class of mutual funds as well as collective trusts. For this universe, the median expense ratio is 42 basis points; the 10th percentile is 66 bps; the 90th percentile is 10 bps (i.e. the higher the fee, the lower the ranking). Much of the difference is driven by active versus passive implementation of target date glidepaths.

This fee data will be updated on an annual basis.

Expense Ratio Analysis

Expense Ratio

Expense Ratio

Methodology

The Callan Target Date Index is an equally weighted composite of 64 target date fund series, including both mutual funds and collective trusts. It is updated quarterly. 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.

Questions on the Callan Target Date Index? Contact Greg Ungerman, DC Practice Leader, at ungerman@callan.com