Summary
- The S&P Target Date® Scorecard provides performance comparisons and analytics covering the U.S. target date fund (TDF) universe.
- The S&P Target Date Index Series is a consensus-driven, multi-asset benchmark for TDFs. It is designed to be an accurate representation of TDFs in the U.S. market and to be the basis against which managers can assess their performance.
- The series is constructed from indices that represent the actual allocations of funds in the U.S. target date space.
- The assets used in the construction of the index series are all investable, and the weights are published in advance of the index series’ rebalancing.
- S&P Dow Jones Indices also produces S&P Target Date Style Indices. The “To” style indices aim to reduce the impact of market drawdowns around the expected retirement date, while the “Through” style indices aim to mitigate longevity risk—the risk of outliving one’s assets in retirement.
- The series consists of 13 S&P Target Date Indices, 11 S&P Target Date “To” Indices and 12 S&P Target Date “Through” Indices. New index vintages are launched in five-year intervals.
Performance Analysis
- 2022 was a distressing year for U.S. equity and fixed income markets. To combat persistent inflation, the Federal Reserve rose interest rates seven times between March and December 2022, for a cumulative hike of 400 bps.
- Large-cap U.S. equities fared the worst compared to their mid- and small-cap peers, with the S&P 500® posting -18.11% over the year, in comparison to the -13.06% and ‑16.10% of the S&P MidCap 400® and S&P SmallCap 600®, respectively.
- International equities suffered the same fate, with the S&P Developed Ex-U.S. BMI and the S&P Emerging BMI returning -16.51% and -18.07%, respectively.
- As the Federal Reserve continued to raise rates throughout the year, yields on U.S. fixed income increased as well. The S&P U.S. Aggregate Bond Index declined 12.03%, the S&P U.S Treasury Inflation Protected Security (TIPS) Index declined 10.50% and the S&P 500 High Yield Corporate Bond Index declined 11.71%.
- The only asset class in the S&P Target Date Index Series that was able to generate a positive returns was the S&P U.S. Treasury Bond 0-1 Year Index, as U.S. Treasury bills became a viable asset class for many investors for the first time in several years. The index gained 0.52%.
- REITs, as represented by the Dow Jones U.S. Select REIT Index, had the worst performance compared to any asset in the S&P Target Date Index Series, at -25.96%.
- Unsurprisingly, far-dated vintages of the S&P Target Date Index Series fared worse than near-dated vintages, due to higher weights to equity and lower weights to fixed income. Although both asset classes performed poorly in 2022, fixed income's relatively better performance mitigated some of the equity losses that dragged far-dated vintages down.
- Near-dated index vintages experienced lower volatility than their far-dated counterparts, with the retirement income vintage experiencing less than half of the volatility of the 2065+ vintage. However, on a one-year basis, risk-adjusted returns were more favorable for far-dated vintages due to relatively higher performance for each unit of risk incurred.
