S&P Launches Index of Target Date Funds
September 29, 2008
Standard & Poor’s has launched a new index that will track all target date funds, in an effort to bring greater transparency and performance measurement to the market.
The S&P Target Date Index Series consists of nine multi-asset class indices, each correlating to a particular target retirement date. The asset class selection and weighting are driven by a survey of target date products available in the market.
S&P has also launched a companion Target Risk Index Series consisting of four multi-asset class indices, each corresponding to a specific risk level. Asset class exposure bounds are obtained through a survey of available target risk funds, and a downside risk control framework is then utilized to determine asset class weights.
The four indices include: The S&P Target Risk Conservative Index, The S&P Target Risk Moderate Index, The S&P Target Risk Growth Index and The S&P Target Risk Aggressive Index.
“The target date fund market is growing rapidly because of greater adoption within defined contribution plans and investors’ desire for one-stop, retirement solution shopping,” said Srikant Dash, head of research and design at Standard & Poor’s Index Services.
“However, differing asset class choices and exposures across the universe have created difficulty in benchmarking performance,” he added. Asset classes within both Index Series are passively represented through index-linked exchange-traded funds.
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