We founded Target Date Analytics LLC (TDA) after completing two comprehensive annual reports on target date funds and while preparing for the third. Our work analyzing target date funds began in early 2005 when we first set out to address the increasing market demand for comprehensive analysis of target date funds, at the fund family level. We called our study Popping the Hood, An Analysis of LifeCycle Fund Families. This study was so popular it was quickly followed by Popping the Hood II, co-sponsored by PLANSPONSOR Magazine. These first two studies were completed by our predecessor firm, Turnstone Advisory Group.
We noticed in the course of our work that there were no acceptable standards against which to measure the various target date products. The industry (plan sponsors, advisors, investors and, indeed, fund companies) sorely needed reliable standards. We formed a new entity, Target Date Analytics, to focus exclusively on the issues of target date funds and folded the research unit of Turnstone into our new firm. Without regard for any entrenched interests—what funds we already had on the shelf, how much our models would earn, how to win short-term performance races—we set out to develop a set of indexes based on the core objectives of glidepath-based investing. Our indexes were first published in 2007. The results surprised even us—no commercially available target date funds have matched the overall performance of our indexes, now known as The OnTarget Indexes (OTI).
The OTI take advantage of the best features of Modern Portfolio Theory, Liability Driven Investing and probability of loss theory, resulting in models with a very high probability of success. We define success as delivering participants to their retirement date with contributions intact and adjusted for inflation. The OTI are aggressive early in the glidepath, when growth is important and worth the risk, and become increasing conservative as the target date approaches, when asset preservation is paramount and time is no longer on the investor’s side.
Target Date Analytics and the OnTarget Index continue to be the standard for target date investing.