Page 1 of 1 | Morningstar Target-Date Fund Series Report | 06-30-2016 | For Financial Professional Use Only.
Schwab Target Target-Date Fund Series Report
Morningstar Analyst Rating
‰
Strategic Glide Path Total Equity Exposure
100%
100
Key Features
Asset-Weighted Expense Ratio
Active/Passive Exposure
Open/Closed Architecture
Total Net Assets ($M)
0.69%
77% Active
58% Closed
3,329
Executive Summary
Rating:
¶ Neutral
Process
Schwab designed a glide path that roughly matches the industry
norm, though its sub-asset-class mix stands out from the crowd.
The series maintains a persistent home-country bias. Within equities, it reduces active, small-cap, and foreign-stock exposures in
favor of passive, large-cap, and domestic equities as the investors age. It also lowers the active component within the fixedincome exposure over time. External subadvisors (including
those found in the Schwab-affiliated Laudus funds) manage roughly 40% of assets, and the majority of assets are invested in active funds.
∞ Positive
Price
This series' funds offer competitive price tags relative to other
target-date strategies that invest in primarily actively managed
underlying funds.
∞ Positive
Performance
All of the series' funds landed in the top half of their peer
groups during the five years through June 2016. A home-country
bias in the equity sleeve and generally strong underlying fund
performance boosted results.
∞ Positive
People
Schwab hired Zifan Tang in January 2012, and she took over as
lead portfolio manager in February 2012. Jake Gilliam of the
firm's collective-trust team previously oversaw manager selection, but the firm hired Tracy Pike in late 2014 to assume that
role and simultaneously relocated the manager-research group
to Colorado from Ohio. John Greves, a transplant from Russell,
joined in June 2016 to oversee the multiasset team. Generally
solid managers run the series' underlying strategies.
¶ Neutral
Parent
Schwab has worked hard to improve its corporate governance in
the wake of the 2008 YieldPlus bond fund fiasco, which resulted
in a settlement with the SEC. The investment-management arm
brought in new executives and portfolio managers, set a focused product agenda, and improved risk oversight and compliance. The firm also has an admirable history of providing lowcost market access for the typical investor.
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key
pillars, which its analysts believe lead to funds that are more
likely to outperform over the long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ
„ ´ ‰
Á
Schwab Target
Industry Average
Industry Maximum/
Industry Minimum
80
80
60
60
40
40
20
20
00
2055 2050 2045 2040 2035 2030 2025 2020 2015 2010 2005 2000
95
92
90
86
80
72
64
54
40
38
35
31
91
90
88
85
79
71
61
52
42
37
34
32
7.40
&
7.42
&
Available Funds
2010 Fund
2015 Fund
2020 Fund
7.29
&
7.20
&
7.05
&
6.76
&
6.47
&
6.01
&
2025 Fund
2030 Fund
2035 Fund
5.45
&
5.04
*
-
2040 Fund
2045 Fund
2050 Fund
-
1995
25
31
Retirement Date
Schwab Target
Industry Average
-
3-Yr Total Return
3-Yr Performance
Quartile
2055 Fund
Morningstar Opinion
Leo Acheson
Analyst - Fund of Fund Strategies 08-03-2016
Schwab Target series has undergone a number of
changes during the last five years, which drives its
Morningstar Analyst Rating of Neutral. However, it remains a serviceable option.
creased passive and domestic exposure in the fixedincome sleeve as investors age, and in 2014 it made
similar modifications in the equity component. The
team revisited its capital market expectations in 2015
and decided to keep the overall stock/bond split unchanged, though it made adjustments beneath the surface. Owing to an improved long-term outlook for developed international equities, it modestly increased
foreign stock exposure at the expense of domestic
equities.
The most recent change occurred in June 2016, when
Schwab hired John Greves to lead its multiasset
team. Greves hails from Russell Investment Management, where he served as a portfolio manager on
that firm's target-date funds. He reports to equities
CIO Omar Aguilar, who formerly headed up the multiasset effort.
The subadvisor oversight team has also recently
changed. In November 2014, Jake Gilliam handed the
reins to Tracy Pike, a recent hire from Janus, so he
could focus on managing the firm's collective-trust target-date series. Schwab relocated Pike's team to Colorado from Ohio, and it lost two analysts in the process. However, with three analyst hires in 2015, Pike
has already rebuilt the team, which stands at five
members, including her. Meanwhile, Zifan Tang, the
series' only named skipper, assumed her role in early
2012. Tang receives support from two dedicated assetallocation analysts, who each have quantitative backgrounds and 10 years of industry experience.
The new cast has made various asset-allocation
tweaks during the past few years. In 2013, it in-
The series benefits from mostly solid underlying
funds. Schwab Total Bond Market, which is passively
managed with low fees, and Gold-rated Metropolitan
West Total Return Bond anchor the fixed-income portfolio. Schwab S&P 500 Index, which receives a Silver
rating, and Laudus International MarketMasters,
which earns a Bronze rating, play a big role in the domestic- and international-equity sleeves, respectively.
Generally skilled managers have contributed to the
series' strong performance. During the trailing fiveand seven-year periods through June 2016, all of the
series' funds place in their peer group's top one third
on a risk-adjusted basis. A home-country bias has
meaningfully contributed to results, as U.S. equities
have led the way. Below-average fees have also boosted peer-relative returns.
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