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TDF Providers Increase International Exposure

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.