Target Date Funds Outside ERISA

In my April newsletter, I noted that target date funds continue to make news and that as interest rates rise, value decreases will be experienced.  A reader commented that, based on the information provided, he would review his 529 plans that were partially invested in bonds.  A fiduciary duty to make (only) prudent investments available to retirement plan participants exists under ERISA, but no such duty exists with respect to 529 plans or investments in general.  It also does not apply to governmental retirement plans, although state law could possibly provide for a result similar to that provided by ERISA.  Many professional asset managers are now moving their clients’ bond holdings to short duration high quality bonds.