The cost to invest in target-date funds fell again in 2016, a fact that analysts at Morningstar said should come as no surprise.
The average asset-weighted expense ratio for a TDF was 71 basis points, down marginally from 2015. But when considered in a longer context, price compression on the favored qualified default investment alternative (QDIA) in 401(k) plans is nothing short of remarkable. Just five years ago, the average TDF expense ratio was 100 basis points.
The continued trend is the result of a confluence of familiar factors that have been impacting the asset management industry. Competition in the TDF space is fierce, and all indications are that that will not change.
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