Finally, advisors should look for an investment policy statement when reviewing the fixed-income portion of target-date funds. Specifically, advisors should look at the allocations to fixed-income over time and at the extent to which portfolio managers can adapt to changing interest rates and market conditions, Sommer advises.
“I am a believer in active management,” Sommer says. “You do not have to be right 100 percent of the time, but you need to have a proven track record and you need to have a process for review. That is what the marketplace is missing in many cases.”