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Why does Vanguard lead all TDF providers in assets under management, with 37.5% of the market? Morningstar suggests that, in 2022, the quest for lower fees and a desire to avoid excessive fee litigation played a role in our TDFs drawing the highest net inflows.
Lower fees typically benefit participants, increasing their savings. With average fees paid of 0.08%, Vanguard’s Target Retirement Funds drew more than three times the net inflow of our nearest competitor’s series last year.
“That reflects well on both our TDF design and our pricing,” said Matt Brancato, a principal in Vanguard Institutional Investor Group. “It speaks to investors’ trust in the Vanguard target-date fund franchise. We have a unique alignment with investors that allows us to put their interests first.”*
Another takeaway from the report is the move to collective investment trusts (CITs), known for their low costs and exemption from certain regulatory constraints. For the first time, Vanguard TDF assets in CITs surpassed those invested in mutual funds. This trend is expected to continue, according to industry analysts.
To find out more, read Morningstar’s Target-Date Strategy Landscape: 2023.
Sources: Vanguard and Morningstar’s Target-Date Strategy Landscape: 2023.
* Vanguard is investor owned. This means investors own the funds that own Vanguard.
- All investing is subject to risk, including the possible loss of the money you invest.
- For more information about Vanguard funds, visit institutional.vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.
- Investments in Target Retirement Funds and Trusts are subject to the risks of their underlying funds. The year in the Fund/Trust name refers to the approximate year (the target date) when an investor in the Fund/Trust would retire and leave the workforce. The Fund/Trust will gradually shift its emphasis from more aggressive investments to more conservative ones based on its target date. The Income Fund/Trust and the Income and Growth Trust has a fixed investment allocation and is designed for investors who are already retired. An investment in a Target Retirement Fund/Trust is not guaranteed at any time, including on or after the target date.
- Vanguard Target Retirement Trusts are not mutual funds. They are collective trusts available only to tax-qualified plans and their eligible participants. Investment objectives, risks, charges, expenses, and other important information should be considered carefully before investing. The collective trust mandates are managed by Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc.