A Morningstar news release said the fund family’s high level of transparency, and prudent, investor-oriented management helped the investment company garner the top rating among the 20 such families evaluated for their management, fees and performance.
“Vanguard`s high-quality orientation was an important factor in 2008, when the family’s target-date funds performed relatively well despite holding a stock allocation similar to many of its peers,” Morningstar declared. “Vanguard`s long-tenured managers also bolster the funds’ appeal.”
At the other end of the scale, according to Morningstar: Oppenheimer received the lowest score of any family examined.
“A relatively aggressive asset allocation and severe problems in some of the funds’ underlying bond holdings led to very poor performance in 2008,” Morningstar said in the news release about Oppenheimer. “Investor losses were further compounded by the steep fees associated with these funds; Oppenheimer has the highest fees among all target-date fund families that Morningstar tracks.”
According to the news release, Morningstar looks at five components—People, Parent, Performance, Portfolio, and Price.
People and Parent ratings are determined by both qualitative and quantitative measures of the funds' management processes. Performance, Portfolio, and Price ratings use quantitative measures to evaluate the quality of both the target-date funds and the underlying holdings in which they invest as well as the cost that investors must pay.
Morningstar then assigns one of five ratings for
each component: Top, Above Average, Average, Below
Average, or Bottom, the announcement said. Based on the
five component ratings, each target-date fund series
earns an overall rating using the same grade scale.
"Target-date funds serve as the core holding for millions of investors as they plan for retirement—often as the only holding—and are increasingly an automatic default option within defined contribution plans. Because they play such a pivotal role in today's portfolios, it's critical for investors to select or have access to a high-quality target-date fund from an investor-focused fund family," said Laura Pavlenko Lutton, editorial director in Morningstar's mutual fund research group.
More information is available at http://global.morningstar.com/TargetDateReports .
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