- In 2020, T. Rowe Price took a daring step by ramping up its exposure to equities in target return funds amidst a pandemic-induced market crash. The move drew criticism initially but has now proven to be remarkably lucrative, with the S&P 500 hitting record highs recently. This success catapulted T. Rowe Price to hold the third-highest assets in target-date funds, trailing only Fidelity and Vanguard.
Maintaining up to 98% investment in its target-date funds, T. Rowe Price stands out from its competitors. A Cerulli analysis revealed that retirees have as much as 55% of their portfolio in equities with T. Rowe Price, exceeding the 38% and 30% equity allocations seen at Fidelity and Vanguard, respectively.
Despite its recent triumphs, some voices remain cautious about T. Rowe Price’s target-date funds and their perceived equity risk. Ron Surz, President of Target Date Solutions, advocates for an 80% risk-free approach at retirement, highlighting that the current risk levels in target-date funds surpass the theoretical standards they are supposed to follow. However, proponents argue that elevated equity allocations are indispensable given the longer lifespans today, which heightens the danger of retirees outliving their savings.
Finsum: T. Rowe Price distinguishes itself by adopting a more aggressive stance towards equity allocations in target-date funds compared to its counterparts. While the strategy has borne fruit, skepticism still looms.
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