A Breakdown of Target-Date Fund Strategies in 2025

Investors continue to invest their retirement savings in target-date funds. Between inflows and market appreciation, assets have grown more than 20% annualized over the past 15 years.

A deeper understanding of target-date strategies empowers asset managers to conduct better competitive analysis and deliver more differentiated offerings. Our 2025 Target-Date Fund Landscape report analyzes flows, fees, asset composition, top picks based on the Morningstar Medalist Rating, and more.

Target-Date 2025 Funds Have Exceeded Expectations

The trust put into target-date funds has been largely theoretical—especially given the few investment offerings and certainly none with sufficiently long, multidecade track records that could demonstrate real-life success.

Even so, these investments have thrived. Combined with the expected income from Social Security, an investor retiring in 2025 who had steadily invested in the 2025 fund over the past 15 years should have savings that adequately support them throughout retirement at an income level similar to what they had in their working years.

37 Target-Date 2025 Funds Have at Least 15 Years of Track Record Through 2024

The actual returns produced by this group of target-date funds have outpaced expectations from the target-date investing models commonly used around 2010.

Plan Sponsors and Investors Upped Conversions to CITs From Mutual Funds

In the past decade, target-date collective investment trusts have been steadily gaining market share over their mutual fund counterparts. They also became the most-used vehicle in mid-2024, accounting for 52% of assets at the end of the year.

This trend may not be shocking: Plan sponsors, for example, often choose to stay with a given target-date investment strategy but move retirement plan assets from a mutual fund vehicle to a CIT investment vehicle. While CITs don’t enjoy the same level of transparency and data availability as mutual funds, they usually come with lower fees.

Mutual Fund to CIT Conversions

Asset managers reported $39.8 billion in target-date fund conversions from mutual funds to CITs last year.

Investors Prefer Lower-Cost Options

Target-date mutual fund portfolios that primarily hold index funds have lower costs than those with more actively managed exposure. Specifically, their average expense ratio is 53 basis points lower than active-based portfolios and 32 basis points lower than blended portfolios. These significant cost savings help explain why index-based target-date strategies have become increasingly favored.

Blended portfolios—which combine active and passive management strategies—are growing in popularity as well. However, they still represent only a small portion of the overall target-date market, comprising just 5% of assets compared with 53% for passive series and 42% for active series.

Average and Asset-Weighted Fees by Portfolio Construction

In all three categories, the asset-weighted expense ratios are lower than the simple averages, which indicates that investors consistently prefer lower-cost options.

Asset-Allocation Glide Paths Have Become More Aggressive and Similar Over Time

The difference between the most and least aggressive target-date asset-allocation glide paths has narrowed, as offerings have converged and become more alike. While change was minimal from 2010 to 2015, the gap narrowed from 2015 to 2020, and the five years through the end of 2024 yielded a small narrowing.

Overall, the range has widened at the end of the glide path owing to equity allocations staying higher for longer. With equity allocations rising, some more conservative target-date offerings may have become less appealing. Target-date funds are supposed to be built for the average person, so a very differentiated offering may have a tougher time surviving.

Average Glide Path Ranges Through Time

The gap between the highest and lowest average equity allocation at each point along the asset-allocation glide path has narrowed over the past 15 years.

Why Understanding Target-Date Funds Matters

Retirement planning looks different for every investor. When asset managers are informed about the industry landscape and popular retirement vehicles like target-date strategies, it can be easier to stay competitive and provide comprehensive options.