Heterogeneity in Target-Date Funds: Optimal Risk-Taking or Risk Matching?
Following the Pension Protection Act of 2006, there was a sharp increase in the use of TDFs as default investment options in defined contribution retirement plans. We document large differences in realized TDF returns and risk profiles, even for funds with the same target retirement date. Using fund-level data, we find evidence that this heterogeneity reflects optimal risk-taking by fund families with low market share, especially those entering the market after 2006. Using plan-level data, we find little evidence that 401(k) plan sponsors match the risk profile of the TDFs in their plans to the risks of their companies.
-
-
Copy CitationPierluigi Balduzzi and Jonathan Reuter, "Heterogeneity in Target-Date Funds: Optimal Risk-Taking or Risk Matching?," NBER Working Paper 17886 (2012), https://doi.org/10.3386/w17886.Download Citation
-
Published Versions
Balduzzi, Pierluigi, and Jonathan Reuter, 2019, “Heterogeneity in Target Date Funds: Strategic Risk-taking or Risk Matching?” Review of Financial Studies 32 (1): 300-337.
Related
More from the NBER
In addition to working papers, the NBER disseminates affiliates’ latest findings through a range of free periodicals—the NBER Reporter, the NBER Digest, the Bulletin on Health, the Bulletin on the Economics of Alzheimer's, and the Bulletin on Entrepreneurship—as well as research spotlights, lectures, and panel videos.
