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Managerial commitment and heterogeneity in target-date funds

Author

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  • Mao, Mike Qinghao
  • Wong, Ching Hin

Abstract

How a portfolio manager allocates own investment in a target date fund (TDF) series is informative about managerial commitment to the TDF investment principle. We find that TDFs whose managers choose to have positive ownership are associated with less idiosyncratic risk taking. In addition, TDFs with managers investing in remote funds and diversifying across TDFs exhibit high idiosyncratic risk taking. Overall, managerial commitment helps explain TDF heterogeneity; the impact of managerial discretion on fund investment strategies demonstrates externalities to 401(k) participants using TDFs as their default option.

Suggested Citation

  • Mao, Mike Qinghao & Wong, Ching Hin, 2022. "Managerial commitment and heterogeneity in target-date funds," Journal of Empirical Finance, Elsevier, vol. 68(C), pages 1-19.
  • Handle: RePEc:eee:empfin:v:68:y:2022:i:c:p:1-19
    DOI: 10.1016/j.jempfin.2022.05.001
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    More about this item

    Keywords

    Default investment; TDF; Managerial commitment; Risk taking;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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