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Increased risk-taking by lifecycle funds

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  • Mao, Mike Qinghao
  • Wong, Ching Hin

Abstract

Lifecycle funds, also known as target-date funds, are designed to follow a glide path, gradually reducing investments in risky assets as investors approach retirement. However, we document that Australian lifecycle funds have, on average, increased growth asset allocation over the past decade, shifting the glide path upward. This trend deviates from the expected risk-reduction strategy by lifecycle funds and is particularly pronounced in retail funds with lower initial risk exposure. The shift can be attributed to lifecycle funds catering to investors' return-chasing and the market perception that some lifecycle funds are overly conservative.

Suggested Citation

  • Mao, Mike Qinghao & Wong, Ching Hin, 2025. "Increased risk-taking by lifecycle funds," Pacific-Basin Finance Journal, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001532
    DOI: 10.1016/j.pacfin.2025.102816
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    References listed on IDEAS

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    Keywords

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    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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