Schapiro Calls for Enhanced Disclosure for Target Date Funds
In a recent speech to the Mutual Fund Directors Forum, SEC Chairman Mary Schapiro called for a close examination of disclosure and investment practices of target date funds. Noting the wide variation in returns among funds with the same target date, Ms. Schapiro suggested that different funds use different assumptions about whether investors will continue to maintain investments after the target date. In this regard, she suggested a dichotomy between target date funds for retirement and those that underlay 529 plans. She indicated that the SEC is “closely reviewing target date funds’ disclosure about their glide paths and asset allocations.” She challenged directors to assess whether target date funds’ asset allocations and investments are “consistent with investor expectations.”
OUR TAKE: Implicit in Ms. Schapiro’s criticism is an assessment of the suitability of a target date fund for a particular investor or purpose. Is this the job of the fund sponsor or the investor’s financial advisor? Regardless, funds should clearly disclose investment policies and assumptions that would apply once a target date is reached.