Tactical Asset Allocation of Target Date Funds

Abstract

Target date fund (TDF) providers claim to provide value for investors through glide path design, implementation, and tactical asset allocation. We study TDFs' tactical asset allocations, or glide path adjustments, and find that TDFs actively adjust their glide paths both across and within asset classes. Glide path adjustments on average destroy value, and larger adjustments are associated with larger underperformance. Glide path adjustments tend to be correlated across TDFs, leading to large shifts in aggregate asset allocations and introducing the potential for impacts on asset prices.