In most surveys, average defined benefit portfolios are found to outperform the average defined contribution plan account. And while that was true in Callan Associates latest “Callan DC Index” report, one category of target date fund — 2030 funds — performed markedly better last year than both overall DC plan assets and DB plans, presumably due to a higher average equity allocation.
But don’t get too excited. According to Callan’s report, measuring cumulative returns since 2006, target date funds lag both the average DB and DC plans, “reflecting poor performance during market downturns.” Over time and with the numbers from the financial crisis period receding, better recent performance may change that picture.
