Greater ‘Target Date’ Fund Disclosures desired by SEC

June 18th, 2010 by James

Greater ‘Target Date’ Fund Disclosures desired by SECIncreased disclosure in the marketing of the increasingly popular “target date” mutual funds is expected to be proposed by the U.S. Securities and Exchange Commission.

S.E.C. Chairman Mary Schapiro, in an open meeting, said that proposed changes to advertising materials, naming, and risk disclosures are intended for reducing the possibility of investor confusion.

From Dealbook.blogs.nytimes.com:

Target date funds are those designed to automatically change their asset mix over time, according to a selected time frame — most often, an investor’s year of anticipated retirement.

Most of the funds are designed so that the mix of investments — such as stocks, bonds and cash — will get more conservative as the target date approaches, to shield investors from possible heavy losses just before retirement.

Commissioners said that because U.S. investors increasingly manage their retirement and investment portfolios themselves, alleviating misunderstanding and confusion over performance expectations for target date funds is a priority — especially after 2008’s performance.

The S.E.C. said funds with a 2010 target date lost an average of 24 percent, in a range of about 9-41 percent during 2008.

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