The target-date fund industry experienced robust growth in 2024, with total assets rising by 15% to reach $3.97 trillion by year-end, according to a new report from Sway Research. A key milestone in this expansion was the long-anticipated shift toward collective investment trusts (CITs), which overtook mutual funds as the dominant vehicle for target-date assets.
By early 2025, CIT-based target-date funds held $2.02 trillion, surpassing the $1.95 trillion managed by mutual fund-based series. This shift reflects investors’ growing preference for lower-cost investment options. Between 2022 and 2024, CIT-based target-date assets grew at an annual rate of 12%, significantly outpacing the 3% growth rate of mutual fund target-date series.
The trend was also evident in new product development. Of the 15 target-date series launched in 2024, 14 were structured as CITs, further cementing their dominance. Over the past six years, the number of mutual fund-based target-date series has declined, while CIT-based offerings have expanded rapidly.
Vanguard Maintains Market Leadership
Vanguard continued to lead the target-date fund space, increasing its assets by nearly $200 billion to reach $1.48 trillion in 2024. This positioned the firm well ahead of its closest competitor, Fidelity Investments, which managed $560 billion. Vanguard’s dominance aligns with the growing preference for passive target-date strategies.
By the end of 2024, passive target-date funds accounted for $2.43 trillion, or 61% of total target-date assets. Actively managed target-date series held $1.13 trillion (29%), while hybrid strategies, which blend active and passive investments, grew to $408 billion (10% of total assets).
“Passive target-date funds have sustained their growth momentum, benefiting from investor demand for cost efficiency,” the report noted. “Hybrid strategies have experienced the fastest growth rate, though from a smaller base.”
Among the fastest-growing providers, flexPATH Strategies saw a 32% increase in target-date assets, reaching $52 billion. The firm introduced four new target-date series in 2024, including the RetirePilot American Funds series, which closed the year with $478 million in assets.
Rising Demand for Income-Oriented Target-Date Funds
A key development in 2024 was the increased adoption of income-oriented target-date funds, which integrate post-retirement income features such as annuities. The number of target-date series offering these options grew to 12, with four new products launched during the year.
BlackRock’s LifePath Paycheck, introduced in April 2024, quickly gained traction, closing the year with $16.4 billion in assets. This rapid growth positioned it as the 27th largest target-date series among the 150 tracked by Sway Research.
“Income-focused target-date funds are drawing interest as investors seek reliable retirement income solutions,” the report stated. “BlackRock’s LifePath Paycheck had a particularly strong debut, underscoring rising demand for these products.”
Several insurance providers play a critical role in supporting these funds with income guarantees. Lincoln, TIAA, and Nationwide back multiple target-date series, while BlackRock’s LifePath Paycheck offers income guarantees through Equitable Financial and Brighthouse Financial. As of early 2025, income-oriented target-date funds collectively managed $22 billion in assets.
Fee Compression Reshapes the Market
The ongoing decline in fees across target-date funds remained a defining trend. In 2024, asset-weighted expense ratios for actively managed mutual fund target-date series fell to 53.3 basis points, down from 54.9 basis points in the previous year. Hybrid strategies saw a slight decrease from 39.9 to 39.1 basis points, while passive target-date funds recorded a marginal drop from 8.9 to 8.7 basis points.
Sway Research noted that over the past five years, expense ratios have declined across all target-date fund categories due to competitive pressures and investor demand for lower-cost options. This trend has further fueled the rise of passive target-date funds, which continue to outpace active strategies in asset growth.
With CITs surpassing mutual funds, passive funds extending their dominance, and income-oriented strategies gaining traction, the target-date fund industry is poised for continued evolution in 2025 and beyond.
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