Vanguard Blows Past Rivals in Target Date Fund Assets

March 7, 2018 — 3:18 PM EST

When it comes to target date funds, Vanguard, one of the world's largest fund managers, blew past its rivals in 2017, with more than $600 billion in assets under management. That's according to InvestmentNews, which cited new data from Sway Research, which tracks asset management distribution within retirement plans.

According to the report, Vanguard had $632 billion in total target date fund assets as of the end of last year. That compares with competitor Fidelity Investments, which is in second place with $244 billion in total target date fund assets under management. The report noted that, since 2015, Vanguard's target date fund assets increased by $270 billion. Vanguard currently controls about 36% of the $1.7 trillion market for target date funds. "The asset growth has been unbelievable," said Chris Brown, founder and principal of Sway Research, in an interview with InvestmentNews. "It's a combination of low fees, solid returns and strong brand name."

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A separate study by Sway Research found that Vanguard was the leader in terms of preferred money managers for target date funds among retirement plan advisors. Third place in terms of target date fund assets was T. Rowe Price with $232 billion. BlackRock, Inc. (BLK) and American Funds rounded out the top five with $140 billion and $89 billion, respectively.

The strong showing on the part of Vanguard comes as the fund company has been expanding outside the U.S. when it comes to target date funds. In December, it launched two new target date retirement fund products for U.K. citizens expecting to retire between 2060 and 2065. The funds have fees of 0.24% and invest in a mix of Vanguard equity and bond index funds and exchange-traded funds. Like Vanguard's other target date retirement fund products, the investment vehicles become more conservative as the investor gets closer to retirement.

Someone who expects to retire between 2060 and 2065 and invests $117 per month in a target date retirement fund could have $158,648 after 40 years of investing, assuming the fund generates returns of 5% and considering the fees. Vanguard has 11 target date retirement funds, which tend to be more heavily weighted toward stocks when the investor is younger and then become more conservative as investors close in on their retirement age.