Is Passive Truly the Safer Fiduciary Choice? | American Funds

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Defined Contribution Insights

January 2016

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 fiduciary protection.
  • Active management may lead to better participant outcomes.


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

This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

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 not to be comprehensive or to provide advice.