Some actively-managed exchange traded funds (ETFs) and target-date funds have not been immune to the market turbulence and have felt the same wrath as other securities in this crazy market.

These investment tools have become a primary investment vehicle for retirement savings, expecting to reach $276 billion and $1.1 trillion in assets, by 2009 and 2013, respectively.  A main characteristic of these funds is that they are managed by firms that use proprietary funds.  In fact, 85% of all target-date assets are held by Fidelity, T. Rowe Price, Vanguard, and Principal, all providers that use only proprietary funds as underlying investments, states Mariana Lehmann of Ignites.

Although the manner in which these funds are managed appears to be monotone, change seems to be in their near future.  Russell Investments is banking on its overall approach to building portfolios to influence the deferred contribution market by offering a “full-service” to advisors and plan sponsors.

Ridgeworth Investments has decided to liquidate its Life Vision Target-Date fund on Feb. 27, 2009, and focus its efforts on participating in the target-date fund marketplace by its funds multi-manager target-date fund providers.   Lastly, Target-date funds which offer best-of-breed funds are starting to evolve and slowly eat away at the target-date funds using proprietary underlying funds.

Among target-date ETFs in the marketplace now are:

• TDX Independence In-Target (TDX)
• TDX Independence 2010 (TDD)
• iShares S&P Moderate Allocation Fund (AOM)
• iShares S&P Growth Allocation Fund (AOR)
• iShares S&P Aggressive Allocation Fund (AOA)

The TDX funds are not structured as funds of funds like other target-date products on the market, and are instead based on proprietary indexes from Zacks Investment Research. The iShares target-date funds aren’t structured as funds of funds, either, although some of iShares ETFs are components.

On Nov. 7, iShares announced a new strategy to be implemented in a series of “target-date” ETFs to help fund retirement or college tuition needs, reports Don Dion for Seeking Alpha. The different funds will have varying time horizons that allow the investor to plan when he or she will need the money.

Asset allocation would shift as the target date approches; thus, arranging a more conservative investment portoflio in atticipation of investor capital withdrawal.

The iShares target-date funds can be used in the savings market. It is said to be well-suited for IRA rollovers or small-sized 401(k) plans with a combination of transparency in ETFs and the benefits of target funds, which may ease mistakes because of poor asset allocation and not making portfolio changes over time.

A similar family of products provided by TD Ameritrade (AMTD), the TDX Independence funds, are composed of individual equities and bonds, whereas iShares created a set of funds derived from iShares ETFs. This may prove to be more conservative for investors over the long term than that of the invidivual equity approach by TD Ameritrade. A couple of current TDX funds include:

• TDX Independence 2010 ETF (TDD): down 12.8% year-to-date

• TDX Independence 2020 ETF (TDH): down 27.8% year-to-date

A recent story we did on the subject noted that one in particular, the TDX Independence 2010 (TDD), was demonstrating “acceptable” performance although it was down year-to-date.

How is this so? In short, the fund is basically doing what it’s supposed to do.

Target-date funds are a unique balance of fund in that they automatically adjust their allocation of equities and bonds. The closer you get toward your retirement date, the higher the ratio of bonds in your portfolio, earning their name of a retirement plan on autopilot.

These funds aren’t really meant to appeal to the investor who actively trades and uses trend-following as a strategy. When you buy a target-date ETF, you’ve essentially committed yourself to the buy-and-hold strategy.

TDD is designed for investors who plan to retire around 2010. 8% of the fund’s assets are allocated to international equities, 24% to domestic equities and 68% to fixed income. The allocation to equities is adjusted downward to 11% in the year 2010.

Investors with an exit strategy like our own – selling a fund when it’s 8% off the high or below its 200-day moving average – aren’t going to be interested in these ETFs. Being down in double digits year-to-date for the trend-following type is definitely not “acceptable.”

Buy-and-hold investors, though, have to accept both the ups and downs of what a long-term strategy like this will give you.

In markets like this, buy-and-holders are feeling pain just as everyone else is – that’s the bad news. These funds aren’t immune from the market declines.

However, going forward, this fund is fairly priced and if you’re looking to make a long-term buy-and-hold allocation, now might be a good time. But investors need to first ask what kind of investor they are; ETFs are not one size fits all. Will this work for you? What are your goals? What is your overall strategy, time horizon and risk profile? Answering these questions first will help you determine what kinds of funds will be the best fit for your portfolio.

Year-to-date, TDD is down 11.8% against the broader S&P 500, which is down 30.1%.

The closer you get toward your retirement date, the higher the ratio of bonds in your portfolio, earning their name of a retirement plan on autopilot. Simon Maierhofer for ETF Guide reports that XShares and TD Ameritrade teamed up and created five TDAX Independence Funds, which he explores in light of the recent market turmoil. Do they follow their objectives?

Combined, they boast $150 million in assets.

• TDX Independence In-Target (TDX): The most conservative fund; 3% of the fund’s assets are allocated to international equities, 8% to domestic equities and 89% to fixed income.

• TDX Independence 2010 (TDD): This fund is designed for investors who plan to retire around 2010. 8% of the fund’s assets are allocated to international equities, 24% to domestic equities and 68% to fixed income. The allocation to equities is adjusted downward to 11% in the year 2010.

• TDX Independence 2020 (TDH): This fund is designed for investors who plan to retire around 2020. 17% of the fund’s assets are allocated to international equities, 49% to domestic equities and 34% to fixed income. After 2020, 11% is allocated to equities.

• TDX Independence 2030 (TDN): This fund is designed for investors who plan to retire around 2030. 22% of the fund’s assets are allocated to international equities, 65% to domestic equities and 13% to fixed income. After 2030, 11% toward equities is adjusted.

• TDX Independence 2040 (TDV): 24% of the fund’s assets are allocated to international equities, 72% to domestic equities and 4% to fixed income. The allocation to equities is adjusted downward to 11% in the year 2040.

The In-Target ETF has certainly provided a place to have parked your money. TDX is down 4.6% year-to-date. The 2010 portfolio is down about 15.3%, which given the general market conditions is acceptable. The 2020 portfolio dropped by 25.5%, the 2030 and 2040 portfolios have lost about 32.3% and 34.2%, respectively.

It’s up to investors to ultimately decide if that performance works for them, and whether these kinds of funds are a fit in their portfolios.

The TDAX exchange traded funds (ETFs) has changed their name. The new name is TDX Independence Funds, effective immediately. Their ticker symbols, as listed on NYSE Arca, will remain the same.

A life-cycle ETF operates under the same asset allocation formula that assumes the investor will retire at a specific, pre-determined date, which is identified in the title of the fund. Over time, the portfolio’s asset allocation becomes more conservative over time so that they stay in line with their objective. These types of funds have other applications, too, such as to save money for a wedding or college.

The ETFs will be known thusly as:

• TDX Independence 2010 (TDD), down 5.6% year-to-date
• TDX Independence 2020 (TDH), down 9.7% year-to-date
• TDX Independence 2030 (TDN), down 12.4% year-to-date
• TDX Independence 2040 (TDV), down 14.3% year-to-date
• TDX Independence In-Target (TDX), up 0.4% year-to-date

The same theory applies: as the life-cycle fund portfolio invests into other mutual funds, life-cycle ETFs invest in other ETFs. Life-cycle ETFs also invest into individual stocks and bonds, used in combination with ETFs to reach the desired asset allocation, reports Lisa Smith for Investopedia.

A life-cycle ETF operates under the same asset allocation formula that assumes the investor will retire at a specific, pre-determined date, which is identified in the title of the fund. The portfolio’s asset allocation should become more conservative over time. The automatic re-balancing that occurs serves as a form of active management, so that the portfolio’s actions stay in line with the objective.

While these funds can also be used to achieve other goals, too, such as getting married or going to college, they’re most commonly marketed toward investors thinking about reitrement.

Some life-cycle ETFs are:

• TDAX Independence 2010 ETF (TDD), down 3.3% year-to-date
• TDAX Independence 2020 ETF (TDH), down 9.4% year-to-date
• TDAX Independence 2030 ETF (TDN), down 12.9% year-to-date