Skip to main content
PGIM Investments LogoPGIM Investments Logo
  • Overview
    • Newsroom
    • PGIM Fixed Income
    • PGIM Real Estate
    • Jennison Associates
    • QMA
    • Careers
    • Mutual Funds
    • ETFs
    • Target Date Funds
    • Closed-End Funds
    • Separately Managed Accounts
    • Thought Leadership
    • Events
    • On the Markets
    • Investment Themes
  • Overview
    • Forms
    • Tax Center
    • Corporate Actions
    • Open Mutual Funds Account
    • Continuing Education Credits
  • Overview
    • DCIO Mutual Funds
    • DCIO Target Date Funds
    • Hybrid Target Date Funds
  • Contact
Fund-header-1280x720px.jpg

Finding the Target Date Sweet SpotFindingtheTargetDateSweetSpot

The return of market volatility after a decade of strong equity returns and muted volatility has highlighted why understanding fiduciary responsibilities and maintaining a prudent process around TDF evaluation and selection has never been more important.

  • Download the Paper

Evaluating the Hybrid Target Date Landscape

There is growing awareness that there are pitfalls to solely using passive funds to implement a TDF glidepath and that some active exposure can improve retirement outcomes, leading hybrid TDFs to capture a growing share of TDF assets. The active-per-basis point expense metric can help plan fiduciaries meaningfully compare hybrid TDFs and determine the reasonableness of expenses in the context of the value being provided.

Prudential Day One® Funds

Learn more about Prudential’s suite of target date funds.

View Funds

Key Takeaways

From Active To Passive

Ten years ago active series dominated target date fund assets (TDF) and flows, but the pendulum has swung definitively into passive territory. Today a confluence of trends, including the industry’s intense focus on fees, has propelled assets and flows into TDFs that implement their glidepaths with only passively managed underlying funds. 

Passive TDFs Are Not The Magic Bullet 

For participants, a purely passive approach to TDF implementation comes with a significant set of opportunity costs including the potential for alpha and enhanced risk mitigation. 

For retirement plan fiduciaries, evaluating TDFs with too exclusive a focus on expenses can actually leave them short, if not in breach, of their responsibilities to plan participants. 

Why Hybrid Is Gaining Traction 

Hybrid TDFs are now gaining traction in the marketplace. By combining passive and active exposure, hybrid TDFs can drastically improve the retirement outcomes for plan participants.  Passive exposure helps keep participant expenses low, while active exposure provides the potential for added incremental returns and the mitigation of key investment risks. 

An Overview of The Hybrid TDF Landscape 

All hybrid TDFs are not created equal. Understanding the different approaches each series takes in mixing active and passive exposures is an important fiduciary concern, especially when looking at it in terms of (1) which asset classes are indexed vs. actively managed; (2) the series overall active and passive exposures; and (3) fund expenses.

Evaluating Hybrid TDFs: Active-Per-Basis Point Expense 

A meaningful evaluation of a hybrid TDF’s expenses requires fiduciaries to consider how much active exposure investors receive for each unit of expense they are paying. Using the active-per-basis-point expense (“Act/BP”) metric can help plan fiduciaries meaningfully compare the expenses of a hybrid TDF to others in its hybrid peer group. 

FINDING THE TARGET DATE SWEET SPOT

Download the white paper to learn more about evaluating the hybrid target date landscape.

View the Paper

The target date is the approximate date when investors plan to retire and may begin withdrawing their money. The asset allocation of the target date funds will become more conservative as the target date approaches and for 10 years after the target date by lessening the equity exposure and increasing the exposure in fixed income investments. The principal value of an investment in a target date fund is not guaranteed at any time, including the target date. There is no guarantee that the fund will provide adequate retirement income.

A target date fund should not be selected solely based on age or retirement date. Before investing, participants should carefully consider the fund’s investment objectives, risks, charges, and expenses, as well as their age, anticipated retirement date, risk tolerance, other investments owned, and planned withdrawals.

The stated asset allocation may be subject to change. It is possible to lose money in a target date fund, including losses near and following retirement. Investments in the Funds are not deposits or obligations of any bank and are not insured or guaranteed by any governmental agency or instrumentality.

Prudential Day One Funds may be offered as: (i) insurance company separate accounts available under group variable annuity contracts issued by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, CT, a Prudential Financial company, and (ii) registered mutual funds offered through Prudential Investment Management Services LLC (PIMS), Newark, NJ, a Prudential Financial company. PRIAC is solely responsible for its own contractual obligations and financial condition.

The Day One Funds, as insurance company separate accounts, are investment vehicles available only to qualified retirement plans, such as 401(k) plans and government plans, and their participants. Unlike mutual funds, the Day One Funds, as insurance company separate accounts, are exempt from Securities and Exchange Commission registration under both the Securities Act of 1933 and the Investment Company Act of 1940, but are subject to oversight by insurance regulators. Therefore, investors are generally not entitled to the protections of the federal securities laws.

1016973-00001-00

Consider a fund's investment objectives, risks, charges and expenses carefully before investing. The prospectus and the summary prospectus contain this and other information about the fund. Contact your financial professional for a prospectus and the summary prospectus. Read them carefully before investing.

An investment in our money market funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the funds seek to preserve the value of your clients investment at $1.00 per share, it is possible to lose money by investing in the funds.

Mutual fund investing involves risk. Some mutual funds have more risk than others. The investment return and principal value will fluctuate and investor's shares when sold may be worth more or less than the original cost. Fixed income investments are subject to interest rate risk, and their value will decline as interest rates rise. Asset allocation and diversification do not assure a profit or protect against loss in declining markets. There is no guarantee a Fund's objectives will be achieved. The risks associated with each fund are explained more fully in each fund's respective prospectus. Your clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation.

Investment products are distributed by Prudential Investment Management Services LLC, a Prudential Financial company, member SIPC. Separately Managed Accounts are offered through our affiliates. Jennison Associates and PGIM, Inc. (PGIM) are registered investment advisors and Prudential Financial companies. QMA is the primary business name of QMA LLC, a wholly owned subsidiary of PGIM. PGIM Fixed Income and PGIM Real Estate, are units of PGIM. © 2021 Prudential Financial, Inc. and its related entities. Jennison Associates, Jennison, PGIM Real Estate, PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

Investment Products: Are not insured by the FDIC or any other federal government agency, may lose value, and are not a deposit of or guaranteed by any bank or any bank affiliate.

  • About Us

    • Overview

    • Newsroom

    • PGIM Fixed Income

    • PGIM Real Estate

    • Jennison Associates

    • QMA

    • Contact

  • Products

    • Overview

    • Mutual Funds

    • ETFs

    • Target Date Funds

    • Closed End Funds

    • Separately Managed Accounts

  • Insights

    • Thought Leadership

    • On the Markets

    • Investment Themes

  • Resources

    • Overview

    • Forms

    • Tax Center

    • Careers

  • Retirement

    • Overview

    • DCIO Investments

    • Meet the Team

PGIM Investments Logo
  • Terms & Conditions
  • Privacy Policy
  • Accessibility

Prudential Financial, Inc. and its related entities.

Proxy Voting Recordsopens in a new window | Audit Committee Charter | Directors/Trusteesopens in a new window | Disclosure of Portfolio Holdings | Form 5500 | Nominating & Governance Committee Charter | Sales Load Breakpoints | Customer Loginopens in a new window | Careersopens in a new window

This site is intended for U.S. investors only.  All investments involve risk, including loss of principal

PGIM, the principal investment management business of Prudential Financial, Inc.(PFI), is comprised of several business units, including PGIM investments.   PGIM Investments, a subsidiary of PFI, is an investment adviser and the investment manager to all PGIM US open-end investment companies and manager or administrator to closed-end investment companies. Other PGIM businesses that may sub-advise certain PGIM Investments open and closed-end investment companies include:  PREI, Jennison Associates, QMA LLC, PGIM Fixed Income.   Securities are offered by Prudential Investment Management Services LLC (PIMS), a PFI company, member FINRAopens in a new window, SIPCopens in a new window and affiliate of PGIM Investments.   Any content relating to securities is the sole responsibility of PIMS, unless otherwise noted.  Check the background of this firm on FINRA’s BrokerCheckopens in a new window.

By accessing links on this web site, you may be leaving PGIM Investments and PIMS and be directed to PGIM Affiliate sites.

Separately Managed Accounts are offered through PGIM, Inc, Jennison Associates and QMA LLC.

The information contained is being provided as general investment education only and does not take into account the investment objectives or financial situation of any existing or prospective investors.  The information should not be construed as investment advice or a recommendation with respect to any security or investment strategy.  Investors seeking information regarding their particular investment needs should contact their financial professional.

© 2021 Prudential Financial, Inc. and its related entities. Jennison Associates, PGIM Real Estate, PGIM and the PGIM logo are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

Prudential Financial, Inc. of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom.

Investment Products: NOT FDIC INSURED | MAY LOSE VALUE | NOT BANK GUARANTEED.