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Rating:Should the Fund Industry Rethink Target Date Fund Branding? Not Rated 0.0 Email Routing List Email & Route  Print Print
Friday, October 30, 2009

Should the Fund Industry Rethink Target Date Fund Branding?

News summary by MFWire's editors

Wednesday's Senate hearing on target date funds, led by Herb Kohl (D. Wis.) and his Special Committee on Aging, focused on the possibility of increased regulation of lifecycle funds. Citing the large losses suffered last year, some witnesses and Senators worried about disclosure and fees within target date funds.

One problem, as noted in an official report, was that the date in the name of target date funds may be misleading to investors. The date, which signifies the expiration of the fund, often isn't consistent with the funds design, making different target date funds difficult to compare and evaluate. Panelists recommended that the shorter target date funds disclose their investment strategies over time (see our sister publication, The 401kWire, for more on the hearing.)

Phyllis Borzi, assistant secretary of labor, argued that investor education has thus far been lacking from fiduciaries, who often don't completely understand target date fund strategy themselves.

The report considers whether target date funds should fall under ERISA regulations or remain independent of that law (and thus independent of the Department of Labor's hand). Witnesses at the hearing advised against regulating target date funds under the Employee Retirement Income Security Act, saying that they are already protected and regulated under the Investment Company Act of of 1940.

The findings were also picked up Friday by The Wall Street Journal's Daisy Maxey

Edited by: Daniel Tovrov

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