Asset Allocation

Target Date Strategies

The Benefits of the T. Rowe Price Approach

T. Rowe Price conducted a study to evaluate whether our active approach to target date implementation has outperformed passive alternatives. We examined the performance of 11 of our Retirement Funds (RFs)—those that had at least a 10-year track record.

Key Points

  • Our study found that all 11 of the Retirement Funds studied outperformed their benchmarks in at least 84% of rolling five-year periods and in 100% of rolling 10-year periods (rolled monthly) from inception through December 31, 2016, net of fees. (The percentage of times a fund beats its designated benchmark, net of fees and trading costs, over a specified time period is called the hit rate.)

  • The returns on each Retirement Fund were compared with each of their respective passive benchmarks in order to quantify the value added by active implementation, including tactical allocation decisions and excess returns generated by security selection in the underlying T. Rowe Price funds.1
Hit Rates and Value Added by Total Active Implementation
Fund Inceptions Through December 31, 2016
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Sources: Bloomberg Barclays, MSCI, Russell, and T. Rowe Price; data analysis by T. Rowe Price.

  • Active tactical allocation added value in 95% or more of all rolling five-year periods and in 100% of rolling 10-year periods since inception.
Hit Rates and Value Added by Tactical Allocation
Fund Inceptions Through December 31, 2016
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Sources: Bloomberg Barclays, MSCI, Russell, and T. Rowe Price; data analysis by T. Rowe Price.

  • For nine of the 11 Retirement Funds, active security selection added value in at least 84% of all rolling five-year periods. Once again, security selection added value over every rolling 10-year period for all 11 RFs.
Hit Rates and Value Added by Active Security Selection
Fund Inceptions Through December 31, 2016
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Sources: Bloomberg Barclays, Credit Suisse, J.P. Morgan, MSCI, Russell, Standard & Poorʼs, and T. Rowe Price; data analysis by T. Rowe Price.

We believe the success of T. Rowe Price’s target date program stems from the firm’s core strengths, including the quality of our asset allocation team, the depth of our global research platform, and the experience and disciplined approach of our portfolio managers.

A Disciplined Long-Term Approach

T. Rowe Price’s target date process seeks to improve outcomes for our clients at multiple levels—via glide-path design, strategic diversification, tactical asset allocation, and active management of many of the underlying portfolio strategies.

We strongly believe in the value of skilled long-term active management, and our target date process seeks to meaningfully enhance retirement outcomes for investors both through tactical asset allocation and active security selection in the underlying strategies.

We attribute our success to T. Rowe Price’s core strengths as a firm, including the quality of our asset allocation team, the depth of our global research platform, and the experience and disciplined approach of our portfolio managers.

Read the Study Highlights

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Read the Full Study

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1 All funds are subject to market risk, including possible loss of principal. For more information on the T. Rowe Price funds used in this study, please visit troweprice.com/complete-target-date-study and troweprice.com.

Call 1-800-225-5132 to request a prospectus or summary prospectus; each includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing.

Important Information

The principal value of the Retirement Funds is not guaranteed at any time, including at or after the target date, which is the approximate year an investor plans to retire (assumed to be age 65) and likely stop making new investments in the fund. If an investor plans to retire significantly earlier or later than age 65, the funds may not be an appropriate investment even if the investor is retiring on or near the target date. The fundsʼ allocations among a broad range of underlying T. Rowe Price stock and bond funds will change over time. The funds emphasize potential capital appreciation during the early phases of retirement asset accumulation, balance the need for appreciation with the need for income as retirement approaches, and focus on supporting an income stream over a long-term postretirement withdrawal horizon. The funds are not designed for a lump-sum redemption at the target date and do not guarantee a particular level of income. The funds maintain a substantial allocation to equities both prior to and after the target date, which can result in greater volatility over shorter time horizons.

The views contained herein are as of September 2017 and may have changed since then.

MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, reviewed, or produced by MSCI.

Russell Investment Group is the source and owner of the trademarks, service marks, and copyrights related to the Russell indexes. Russell® is a trademark of Russell Investment Group.

Note: Bloomberg Barclays index data: Bloomberg Index Services Ltd. Copyright© 2017, Bloomberg Index Services Ltd. Used with permission.

This information is provided for informational and educational purposes only and are not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. This information provides opinions and commentary that do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy.

Note that past performance data throughout this material are not reliable indicators of future performance.

T. Rowe Price Investment Services, Inc., Distributor.

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