Research and publications

From Deterministic To Stochastic Life-Cycle Investing: Implications For The Design Of Improved Forms Of Target Date Funds

In an attempt to address the concern over financially illiterate individuals being increasingly responsible for investment decisions related to retirement risk, the financial industry has started t ...

Author(s) :

Lionel Martellini, Vincent Milhau

Summary :

In an attempt to address the concern over financially illiterate individuals being increasingly responsible for investment decisions related to retirement risk, the financial industry has started to design dedicated mutual fund products known as target date funds. These funds, whose aim is to provide investors with one-stop solutions to their life-cycle investment needs, typically propose a deterministic decrease of equity allocation until a date called the target date of the fund. This approach, however, has been found inconsistent with the prescriptions of standard life-cycle investment models (Viceira and Field 2007). A revisited version of this paper was published in the November-December 2010 issue of Bankers, Markets & Investors.

Register to download PDF

Register
Type : EDHEC Publication
Date : 30/09/2010
Keywords :

Investment Management