There is more controversy about target date funds-their asset allocation, disclosure requirements, and whether and/or how they should be regulated. The root of the problem is that many target date funds did poorly in 2008 because they had large equity allocations in their glide path to retirement. There seems to be some pressure to make them more “conservative” by boosting the allocation to bonds. So what happens to workers who become retirees in a rising interest rate environment? How is that any better?
In my opinion, target date funds were oversold as the answer to every investor’s problem of how to handle their 401k. Target date funds were presented as the ultimate “set it and forget it” solution. Eventually, investors may come around to realize that strategic allocation solutions are not the be-all-and-end all. A tactical product can adapt to the situation at hand, rather than simply continuing down a potentially flawed glide path. Even though they require more thought and expertise, well-executed tactical solutions (like our Systematic RS Global Macro product or the Arrow DWA Balanced Fund) have a lot to recommend them.
Click here to visit ArrowFunds.com for a prospectus & disclosures. Click here for disclosures from Dorsey Wright Money Management.
