RT Journal Article SR Electronic T1 Practical Applications of An Empirical Examination of Lifestyle Mutual Funds JF Practical Applications FD Institutional Investor Journals SP pa.2022.pa510 DO 10.3905/pa.2022.pa510 A1 Srinidhi Kanuri YR 2022 UL https://pm-research.com/content/early/2022/08/22/pa.2022.pa510.abstract AB In An Empirical Examination of Lifestyle Mutual Funds, from the Winter 2022 issue of The Journal of Retirement, author Srinidhi Kanuri of the University of Southern Mississippi analyzes the performance of lifestyle mutual funds. Unlike target-date funds—which reallocate to more conservative investments as the investor’s retirement date approaches—lifestyle funds maintain a static asset allocation that is aggressive (mostly equities), moderate, or conservative (mostly fixed income). Lifestyle funds are increasingly popular, so it is important to know how they perform relative to lower-cost investments like index funds.The study measured the performance of all lifestyle funds in the Morningstar database from January 1994 through August 2017. It found that lifestyle funds underperformed US stock indexes and comparable balanced portfolios of stock and bond index funds (net of fees). Lifestyle funds had lower risk-adjusted performance and negative net alpha, but their gross alpha was statistically no different from zero. Therefore, they selected well-performing investments but charged high fees that cut into performance. Financial advisors may wish to consider alternatives to lifestyle funds—such as allocating to a mix of low-cost index funds—when constructing balanced retirement portfolios for clients.