“Lifecycle funds present a growing challenge to fiduciaries who must balance the favorable pending regulations with the complexities involved in evaluating this expanding group of funds,” explained Jeff Elvander, chief investment strategist at 401(k) Advisors. Asset allocation funds are difficult to benchmark because they invest in a wide number of asset classes and the allocations vary over time.
“The enhancements to our Scorecard System provide clients and their employees with exceptional opportunities for long-term competitive investment returns, in a framework that better identifies and manages risk.”
The enhancements include identifying an appropriate benchmark and peer group against which to measure each fund.
401(k) Advisors’ Scorecard grades funds on a scale of 0-10, with 10 being the best. Although there are 400 lifecycle funds on the market, the firm conducted an initial screening of 80 such funds and found that only 40% got a score of seven or higher. In fact, 20% got poor scores, of four or lower.
