Morningstar to Rate Target-Date Funds

Citing the vast disparity in the performance of target-date funds, Morningstar by year-end will begin rating and researching target-date funds to make them more transparent and more easily comparable, for professional and retail investors alike, the research firm announced Thursday.

“Target-date funds have come under scrutiny in recent months,” said John Rekenthaler, vice president of research. “Disparity in the performance in 2008 among funds with the same target-date caused many to second guess the funds’ investment policies and strategies, leading to the joint hearing before the SEC and the Department of Labor next month. Surprise about these variations in performance reveals the lack of knowledge about this new, fast-growing category of mutual funds.”