The Securities and Exchange commissioner says "vague and confusing" language describing target date funds led to investor confusion when investments performed poorly during the market downturn.
Language used to describe how target date funds operate is “vague and confusing,” according to Luis A. Aguilar, a commissioner with the Securities and Exchange Commission.
It's one of the reasons why investors were so surprised by the poor performance of many target date funds during the recent market downturn, Mr. Aguilar told attendees today at the Investment Company Institute's Mutual Funds and Investment Management Conference in Phoenix.
And it's one of the reasons why the SEC is looking at making new recommendations, he said, regarding how target date funds are constructed. The agency plans to propose recommendations this year.
During his speech, Mr. Aguilar also took aim at the marketing of money market funds, stating that the mutual fund industry needs to educate investors better with regard to the risks associated with such investments, he said. That message, he said, may have gotten lost after federal intervention in the money fund market raised expectations that the government will step in during tough times.
Mr. Aguilar also used the conference as an opportunity to stump for a change to the way the SEC is funded.
As Congress debates how best to overhaul regulation of the financial markets, it should seriously consider allowing the SEC to be self-funding, he said. Allowing it to do so based on fees it collects — an idea that is currently in proposed legislation — would give the regulator the ability to plan for the future more effectively, Mr. Aguilar said.
