BrightScope and Target Date Analytics combine to create new target date index

BrightScope, Target Date Analytics form new index

SAN DIEGO, Calif. — Retirement fund ratings company BrightScope Inc. said Monday it has partnered with consultant Target Date Analytics LLC to design a Web site to help investors track the performance of target date funds.

These types of funds, also known as lifecycle funds, typically become more conservative as the investor approaches retirement.

The funds, which hold more than $200 billion, came under criticism in the past year as stock values plummeted and many near retirees lost as much as 40 percent of their investment. The average loss was about 25 percent, according to recent congressional committee testimony by Andrew Donohue, the director of investment management at the U.S. Securities and Exchange Commission. The funds are promoted as a secure way to take advantage of market gains while protecting the investment as one gets ready to retire.

The new product, the BrightScope On Target Index, is designed to help 401(k) plan sponsors, advisers and investors measure the performance and risk of their target date fund, said BrightScope CEO Mike Alfred.

He said some companies offering target date funds were caught holding more stocks near the retirement date than was prudent. One reason is that companies can charge a higher expense ratio in equity funds than bonds funds, making stock funds more profitable, Alfred said.

The target index will give participants a way to see how accurately a target date fund is meeting goals outlined in its plan documents.

One of the features of the index is that it looks at actual participant behavior when determining the appropriate asset allocation for participants approaching retirement, he said.

BrightScope, based in San Diego, launched its 401(k) ratings site in January and has had nearly a half million unique visitors and 1.5 million page views, Alfred said. It has rated more than 16,500 401(k) plans, spanning more than 27 million workers and over $1.6 trillion in assets.

The company is working to rate more than 30,000 plans by the end of this year.

Target Date Analytics, Marina del Rey, Calif., is a consultant for retirement plan sponsors, advisers and fund companies and helps design target date funds.