Perspectives : DC Retirement | May 14, 2024

See TDFs through the eyes of Vanguard's portfolio managers

Read time: 5 minutes

Vanguard target-date funds (TDFs) continue to be a cornerstone investment for those saving for retirement. Last year, Vanguard announced several enhancements related to the oversight and management of the TDF series. This included the addition of two Vanguard portfolio managers: Roger Aliaga-Díaz and Michael Roach.

Aliaga-Díaz is the chief economist for the Americas and head of portfolio construction, and Roach is a senior manager and head of multiasset portfolio management.

During a recent webcast, Aliaga-Díaz and Roach discussed managing one of the industry’s largest TDF series and shared their perspectives on key trends in the target-date fund space. Their conversation was moderated by Jane Greenfield, principal and head of consultant relations.

Here are a few highlights from the event. You can also view the full webcast if you prefer.

A consistent investment strategy

Both Aliaga-Díaz and Roach talked about being members of Vanguard’s Strategic Asset Allocation Committee (SAAC), which oversees and governs the asset allocation methodology of Vanguard TDFs. Aliaga-Díaz, who is also the committee’s vice chairman, described how the SAAC ensures a consistent approach to meet the retirement goals of TDF investors.

The committee—composed of global senior investment leaders from across Vanguard—engages in debates on various topics and constantly evaluates ways to improve TDFs to meet the evolving needs of investors. However, the committee also maintains a high bar for change.

“In the committee, we have set a series of guidelines and thresholds to assess the significance of a change,” Aliaga-Díaz said. “That is, we want to ensure that any change has meaningful impact in the ability for investors to achieve retirement success before actually approving it.” 

Asset allocation diversification and rebalancing are key

Vanguard's TDFs are well diversified. In fact, Roach emphasized that they’re some of the most diversified funds in the TDF industry, with significant coverage of global liquid market cap.

He also explained that Vanguard’s TDFs use only five underlying building blocks, which allows our funds to be better understood by investors.

“It's a balance [between] clients understanding these products but then also plan sponsors meeting their fiduciary responsibility,” Roach said. “That's where the sophistication comes in.”
Roach and Aliaga-Díaz also discussed Vanguard's rebalancing methodology, which takes a threshold-based approach rather than one that is calendar based. The threshold-based policy seeks to strike the right balance between minimizing transaction costs and always maintaining close alignment to the target asset allocation. Further, aligning Vanguard’s TDFs and benchmark rebalancing methodologies promotes clearer performance measurement.
“We design these portfolios just for performance consistency; we're not producing portfolios to make tactical changes reacting to noise,” Roach said. “We want to learn from the past but not fully be reactive to it every day if we want to have that forward-looking approach.”

A commitment to research and tracking investment trends

As the TDF industry continues to evolve, Vanguard is paying close attention to new trends and products. A current hot topic for plan participants and consultants is hybrid annuity TDFs, or annuities embedded within TDFs.

Aliaga-Díaz acknowledged that, through the eyes of investors, this new breed of TDFs is exciting. But he cautioned that they’re not for everyone.

“From the investment side, we ran our proprietary Vanguard Life-Cycle Investing Model, where we embedded a variety of guaranteed income annuities in them to assess the impact,” he said. “And we found that, actually, they're effective. They do mitigate longevity risk, so they do work from a pure investment perspective.”

He added: “But then, in spite of those benefits, we also ran some points from client studies, and we found there are some challenges, particularly from the implementation perspective, as well as from the suitability assessment of the participants.”

For investors who are approaching retirement and are more certain about their savings goals, Aliaga-Díaz reminded viewers that Vanguard also offers a Target Retirement Income and Growth Trust as an alternative equity landing point.

For more information about our approach to TDFs, you can view the full webcast to hear from Vanguard’s portfolio managers.


  • For more information about Vanguard funds, visit to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing. 
  • All investing is subject to risk, including possible loss of principal.
  • Investments in Target Retirement funds are subject to the risks of their underlying funds. The year in the fund name refers to the approximate year (the target date) when an investor in the fund would retire and leave the workforce. The fund will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income fund has a fixed investment allocation and is designed for investors who are already retired. An investment in a Target Retirement Fund is not guaranteed at any time, including on or after the target date.
  • Diversification does not ensure a profit or protect against a loss.
  • Please remember that all investments involve some risk. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income.
Roger Aliaga-Díaz, Ph.D.

Global Head of Portfolio Construction and Chief Economist, Americas

Michael Roach, CFA

Senior Manager, Head of Multi-Asset Portfolio Management