Securities and Exchange Commission Chairman Mary Schapiro said the agency is reviewing target-date funds to ensure they are adequately disclosing information about asset allocation.

Target-date funds have become more popular in recent years both as a retirement vehicle and for parents seeking to save money when their children are ready to go to college.

These funds invest in a mix of stocks and fixed-income securities, and the percentage of these asset classes changes over time as a fund approaches its target date. Typically the switch in asset allocation, known as a "glide path," grows more conservative over time as a target date approaches.

'Troubling' Returns

In a speech before the Mutual Fund Directors Forum on Monday, Ms. Schapiro said the investment results from these target funds have been "troubling" in recent times, with an average loss in 2008 among 31 funds with a 2010 retirement date at almost 25%.

She said the SEC is "closely reviewing target-date funds' disclosure about their glide paths and asset allocations."

"One explanation put forward for these outcomes is that many target-date funds' underlying retirement plans actually establish their glide paths based on the assumption that investors will continue to maintain their investments, and partially live off the proceeds," Ms. Schapiro said. "If that is the case, it must be plainly disclosed to investors."

Ms. Schapiro disclosed for the first time publicly that the SEC is considering whether additional measures are needed to align target funds' glide paths and asset allocations with investor expectations.

Misleading Monikers?

Among the issues being considered, she said, is whether the use of a particular target date in a fund's name may be misleading or confusing.

The SEC will hold a joint roundtable with the Department of Labor on the subject, she added, noting that the SEC has been working closely with Labor "in light of target funds' prevalence in participant-directed retirement funds."

Since becoming head of the SEC in January, Ms. Schapiro has said she plans to explore a number of regulatory changes for mutual funds, and particularly money-market funds, after the Primary Reserve Fund "broke the buck" last year, seeing its net asset value fall below $1 a share.

The breaking of the buck stoked fears over the safety of the nearly $4 trillion in assets held in money-market mutual funds.

Proposals to improve liquidity, maturity and credit quality surrounding money-market funds are due sometime in June. Another proposal to decide if investors are better protected by floating-rate net asset values will also be part of the mix, she said.

In addition, Ms. Schapiro said the SEC is contemplating potential regulatory changes to so-called 12b-1 fees, which are drawn from mutual-fund assets to pay for shareholders' distribution and service expenses.

"Rule 12b-1 is an area in need of reconsideration," she said, although she noted the SEC isn't likely to act on the rule in the next month when it considers other money-market reforms.

Declaration of Independents

Ms. Schapiro also left open the possibility Monday that the agency at some point could revisit a rule requiring mutual funds to have independent directors. That fund-governance rule, first floated by the SEC in 2004, sought to require that 75% of mutual-fund directors be free from fund management.

The rule was never implemented, however, after the U.S. Chamber of Commerce successfully fought it twice in a federal appeals court.

"It's certainly not off the table," Ms. Schapiro said in response to a question from the audience, although she noted it isn't on the "short-term agenda."