Target-date funds struggled to recover from volatility left over from a "very tough third quarter," according to the Ibbotson Target Maturity Report, released Monday. Recovering equity markets proved to be a boon for target maturity funds due to their mix of multiple asset classes, though they did end the year slightly down.
Among the 386 funds covered in the report, the average return in the fourth quarter was 6.8%, after losing 11.8% in the third quarter. Funds closer to their target retirement date tended to outperform those further out from retirement.
Non-U.S. equity and commodities dragged funds down, returning 3.4% and 0.3% respectively. Domestic small-cap equities were strong performers, followed by large-cap equity. Real estate returned 15.3%.
"The fourth-quarter asset class performance saw a sharp reversal of the third quarter's poor returns in equities and most higher-risk assets," according to the report. "Non-U.S. equities, both developed and emerging, once again struggled on a relative basis, but posted positive returns during the quarter. These asset classes continue to be weighed down by fiscal issues in the eurozone along with a strengthening U.S. dollar."
