At the hearing on target-date funds that the Department of Labor and the Securities and Exchange Commission is holding tomorrow, the focus is likely to be on better disclosure of holdings.

Even though the makeup and glidepaths of target-date funds varies so considerably, as proven by the range of minus 7% to minus 41% that 2010 target-date funds delivered in 2008, fund executives who speak are expected to resist government-mandated caps on holdings.

The Investment Company Institute, for one, is against such limits. Imposing caps “would undermine the fiduciary role of employers who sponsor retirement plans and have a strong history of responsibly evaluating investment options for their workers,” ICI President and CEO Paul Schott Stevens told MarketWatch. “Regulation would also take away choice, stifle innovation and substitute government’s judgment for that of portfolio managers, employers, investors and the marketplace.”

Michael Herbst, a mutual fund analyst with Morningstar, characterized standardized disclosure as a realistic compromise, given that the industry will probably resist the DOL and the SEC “interfering with how the target-date funds operate” even though the reality is that “there’s a much wider range of philosophies and strategies within the target-date universe than most investors would imagine.”

But others dismiss disclosure as mere “tinkering” and wholly inadequate in light of the catastrophic losses that many investors suffered in target-date funds over the past 18 months. Mercer Bullard, founder of Fund Democracy said better disclosure is merely “punting the issue.”

“This is not a prospectus issue,” he said. “What we’re talking about here is a fund name and qualified default option that assume something generic about the investor’s need, and that’s what makes the funds potentially so misleading.”

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