Measure How Well a Target Date Fund has Surfed the Highs and

Measure How Well a Target Date Fund has Surfed the Highs and Lows


Given this, how can we measure target date success?
Overall capture ratio may be a helpful evaluation tool.
Investments with multiple objectives can be challenging to evaluate. In the case of a target date fund, how can we know if what works for young participants also works for those nearing retirement?
The need to serve changing objectives in one offering makes target date funds fundamentally different than other investments — and calls for a different measurement tool.
Advisors and consultants use upside capture ratio to gauge how fully a fund has participated when markets appreciate. Upside capture is a measure of how well a fund did relative to equity markets (usually measured by the S&P 500 Index) during periods when the index has risen. When markets decline, a comparable measure — downside capture ratio — is used to measure how well the fund limited losses compared to the index.

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