What’s in a Target-Date Fund’s Name Mislead Investors and ‘Troubling’ Results Could Lead to Crackdown

By Staff Report

Jun. 3, 2009

The Securities and Exchange Commission is considering cracking down on the use of target-date retirement fund names that could be “misleading or confusing to investors,” SEC Chairwoman Mary L. Schapiro testified Tuesday, June 2, at a Senate subcommittee hearing.

“Among other issues, we will consider whether the use of a particular target date in a fund’s name may be misleading or confusing to investors and whether there are additional controls the SEC should impose to govern the use of a target date in a fund’s name,” Schapiro said in prepared remarks to the Senate Financial Services and General Government Subcommittee.

Target-date funds “have produced some troubling investment results,” Schapiro testified.

She said the average loss in 2008 among 31 funds with a 2010 retirement date was almost 25 percent. In addition, she said the different investment strategies used by the 2010 funds resulted in investment losses last year ranging from 3.6 to 41 percent.

“These returns cause concern for investors and regulators alike,” Schapiro said. “I can assure you that SEC staff is closely reviewing target-date funds’ disclosure about their asset allocations. In addition, in connection with our joint hearing with the Department of Labor, we will consider whether additional measures are needed to better align target-date funds’ asset allocations with investor expectations.”

The joint hearing by the SEC and Labor Department on target-date funds is scheduled for June 18.

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail


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