SAN FRANCISCO--(BUSINESS WIRE)--Target date funds vary widely in their approach, making it all the more critical that retirement plan sponsors and advisors monitor them regularly to confirm they are performing as expected. This can be particularly difficult with these types of funds because they vary with respect to their investment strategies, glide paths, and performance in different market environments. Wells Fargo Advantage Funds offers a three-step process that can help.
When it comes to evaluating target date fund performance, the default has typically been to compare a fund’s total return to that of other funds in its peer group since these rankings are readily available. However, these simple rankings do not account for different asset allocations and risk levels between funds in the same peer group.
In a recently published white paper, Wells Fargo Advantage Funds outlines a methodology it believes to be more effective in evaluating target date fund performance, an approach that is based on both absolute and risk-adjusted measures.
A Roadmap for Evaluating Target Date Fund Performance provides a three-step monitoring process intended to be comprehensive yet actionable.
“Three steps and five statistics form the basis of our approach to a more accurate evaluation of target date fund performance,” said Jim Lauder, CEO of Global Index Advisors, Inc., the subadvisor for Wells Fargo Advantage Funds’ suite of target date funds. “Given the focus on fiduciary duty and the prominence of target date funds in retirement plans, it’s imperative that plan sponsors have a, supportable measure of performance, one that incorporates risk as well as returns. Our roadmap is consistent and relatively easy to implement, in spite of the complexity of target date funds.”
Financial professionals and plan sponsors can obtain a copy of A Roadmap for Evaluating Target Date Fund Performance by visiting www.wellsfargoadvantagefunds.com/roadmap.
About Wells Fargo Funds Management
Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Advantage Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA/SIPC, an affiliate of Wells Fargo & Company.
The target date represents the year in which investors may likely begin withdrawing assets. The funds gradually seek to reduce market risk as the target date approaches and after it arrives by decreasing equity exposure and increasing fixed-income exposure. The principal value is not guaranteed at any time, including at the target date.
Stock values fluctuate in response to the activities of individual companies and general market and economic conditions. Bond values fluctuate in response to the financial condition of individual issuers, general market and economic conditions, and changes in interest rates. In general, when interest rates rise, bond values fall and investors may lose principal value. The use of derivatives may reduce returns and/or increase volatility. Certain investment strategies tend to increase the total risk of an investment (relative to the broader market). This fund is exposed to foreign investment risk, mortgage- and asset-backed securities risk, smaller-company investment risk, and allocation methodology risk (risk that the allocation methodology of the Dow Jones Target Date Index, whose total returns the fund seeks to approximate, before fees and expenses, will not meet an investor’s goals). Consult the fund’s prospectus for additional information on these and other risks.
“Dow Jones®” and “Dow Jones Target Date IndexesSM” are service marks of Dow Jones Trademark Holdings LLC (Dow Jones); have been licensed to CME Group Index Services LLC (CME Indexes); and have been sublicensed for use for certain purposes by Global Index Advisors, Inc., and Wells Fargo Funds Management, LLC. The Wells Fargo Advantage Dow Jones Target Date FundsSM, based on the Dow Jones Target Date Indexes, are not sponsored, endorsed, sold, or promoted by Dow Jones, CME Indexes, or their respective affiliates, and none of them makes any representation regarding the advisability of investing in such product(s).
Carefully consider a fund's investment objectives, risks, charges, and expenses before investing. For a current prospectus and, if available, a summary prospectus, containing this and other information, visit wellsfargoadvantagefunds.com. Read it carefully before investing.
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NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE