Abstract
How a portfolio manager allocates own investment in a target date fund (TDF) series is informative about managerial commitment to the TDF investment principle. We find that TDFs whose managers choose to have zero ownership are associated with more idiosyncratic risk taking. In addition, TDFs with managers investing in remote funds and diversifying across TDFs exhibit high idiosyncratic risk taking. Overall, managerial commitment helps explain TDF heterogeneity; the impact of managerial discretion on fund investment strategies demonstrates externalities to 401(k) participants using TDFs as their default option.
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