Is Passive Truly the Safer Fiduciary Choice for TDFs? | Capital Group

Defined Contribution Investment Perspectives


Is Passive Truly the Safer Fiduciary Choice for TDFs?

Given the rapid acceptance of target date funds (TDFs) as the primary retirement investment strategy for American workers, the choice of target date provider is now among the most important decisions for an investment committee.

The beauty of a TDF is its simplicity for participants. However, its underlying complexity can challenge committees tasked with assessing a TDF’s glide path design, risk/return profile and fee structure as part of fiduciary due diligence.

One of the considerations is whether the TDF should be actively or passively managed. In either case, appropriate due diligence must be conducted. When selecting a TDF provider, sponsors should remember:

  • Passive management does not provide inherent fiduciary protection.
  • Active management may lead to better participant outcomes.


How Should Advisors Evaluate Target Date Funds?

American Funds' John Doyle discusses fees, glide paths and evaluation tools with PLANADVISER.

John Doyle
Jason Bortz
Jason Bortz Associate Counsel Los Angeles office 21 years of experience (as of 12/31/18)
Toni Brown
Toni Brown Senior Defined Contribution Specialist San Francisco office 30 years of experience (as of 12/31/2019)
John Doyle
John Doyle Senior Defined Contribution Specialist New York office 33 years of experience (as of 12/31/2019)
Sue Walton Senior Vice President, Defined Contribution Chicago office 22 years of experience (as of 12/31/2019)


Passive investments do not have inherently greater fiduciary protection than active investments. When selecting TDFs, sponsors should evaluate a range of criteria, including:

  • The glide path, including the quality and type of equity and fixed income exposures as they change over time.
  • The investment process, including the level of managerial ownership and oversight.
  • Fees relative to comparable strategies and value received.

Taking an active approach to target date selection can help sponsors meet their fiduciary responsibilities while facilitating sound and productive retirement savings for their workers.

“Active managers with low fees and personal investment in their funds may be better aligned with participant objectives.”

— John Doyle


Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing. Similar information about collective investment trusts can be obtained from Capital Group or participants’ plan provider or employer. 

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation. 

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.