In recent months, several target date fund providers have announced that they will be increasing exposure to international investments along their glide paths. For most providers, the overall mix of stocks/bonds will not change, but increases in exposure to non-US equity and non-US fixed income will be counterbalanced with corresponding reductions to US equity and US fixed income. These providers cite various rationales behind the changes in TDF allocations, including: 1) adding non-US asset classes to the set of underlying funds as a means of increasing diversification; 2) reducing home bias in the portfolios by more closely aligning the ratio between US/non-US equity and fixed income more closely with that of the actual global market cap in those spaces; 3) the cost of managing non-US assets coming down; and 4) changes in capital market expectations for the different asset classes.
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