TDF benchmarking and comparison remain an enigma. Despite our industry emphasizing past performance is not indicative of future results, past performance is still the primary method for comparing and selecting TDFs. This is particularly folly for multi-asset portfolios, where asset classes are cyclical and mean reverting. Qualitative research and a logical approach should guide TDF selection.
Understand the TDF’s key thesis and differentiators.
Understand asset class tilts, which will largely dictate when a series outperforms and underperforms.
Keep in mind people invest in funds, so consider participant-level returns (factoring attrition & behavior).
Understand the manager's assumptions/inputs used to construct their glidepath.
