Target-date series assets, as well as the number of target-date series, have doubled in recent years.

As of November 2011, there were 43 unique open-end, target-date series, and approximately half of these series began operations in the last five years, with five new series introduced in 2009 and 2010 alone. In 2008, target-date series held $175.8 billion in assets, which more than doubled to $368.5 billion by Oct. 31, 2011.

Seeming to contradict this rapid growth, target-date funds near retirement experienced severe losses in conjunction with the stock market in 2008. Target-date 2010 funds, a mere two years from their retirement date at the time of the economic downturn, experienced dramatic median performance losses near 30% but showed positive median returns in the years 2009 and 2010. By the end of 2010, target-date funds for 2010 had median annualized 10-year performance of less than 5%, which is similar to returns in a traditional fixed- income mutual fund investment.

These significant losses helped prompt the Securities and Exchange Commission to propose new nomenclature rules for target-date funds along with guidelines regarding disclosure of so-called "glidepath" information. Under this new proposal, funds would be required to provide detailed disclosure of their asset allocation at the fund's target date.

Compared to 2008, fund companies have increased disclosure in the prospectuses of target-date funds. One obvious change revolves around the "to" versus "through" dichotomy. In 2008, it was difficult to discern which target-date series had a "to" or a "through" structure.

Specifically, "through" target-date funds continue to adjust their equity exposure after the retirement date, while "to" target-date funds either do not adjust their equity exposure after the retirement date or immediately move the assets into their retirement offering.

"Through" target-date series have an average of 45% equity exposure at the retirement date, compared to an average of only 31% equity exposure for "to" target-date series.

The difference in the average equity exposure in "to" and "through" target-date funds is 14%. Equity exposure has implications for fund performance, risk, and expenses. Equity exposure's effect on performance varies by market conditions.

In addition, equity is a riskier investment, and with higher risk comes a potential for greater rewards and losses. Investors need to be aware of the equity exposure of the target-date series, as well as whether the target-date series is "to" or "through" and the implications for the target retirement date.

Sasha Franger is a Fiduciary Research Analyst for Lipper.

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