What’s in a Target-Date Fund’s Name? Mislead Investors and ‘Troubling’ Results Could Lead to Crackdown
The SEC is considering cracking down on the use of target-date retirement fund names that could be ‘misleading or confusing to investors,’ SEC Chairwoman Mary L. Schapiro testifies during a Senate subcommittee hearing.
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June 3, 2009
What’s in a Target-Date Fund’s Name? Mislead Investors and ‘Troubling’ Results Could Lead to Crackdown
The Securities and Exchange Commission is considering cracking down on
the use of target-date retirement
fund names that could be “misleading
or confusing to investors,” SEC Chairwoman
Mary L. Schapiro testified
Tuesday, June 2, at a Senate subcommittee
hearing.
“Among other issues, we will consider whether the use of a particular target
date in a fund’s name may be misleading or confusing to investors and
whether
there are additional controls the SEC should impose to govern
the use of a
target date in a fund’s name,” Schapiro said in prepared
remarks to the Senate
Financial Services and General Government
Subcommittee.
Target-date funds “have produced some troubling investment results,” Schapiro
testified.
She said the average loss in 2008 among 31 funds with a 2010 retirement date
was almost 25 percent. In addition, she said the different investment
strategies
used by the 2010 funds resulted in investment losses last
year ranging from 3.6
to 41 percent.
“These returns cause concern for investors and regulators alike,” Schapiro
said. “I can assure you that SEC staff is closely reviewing target-date
funds’
disclosure about their asset allocations. In addition, in
connection with our
joint hearing with the Department of Labor, we will
consider whether additional
measures are needed to better align
target-date funds’ asset allocations with
investor expectations.”
The joint hearing by the SEC and Labor Department on target-date funds is
scheduled for June 18.
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