Four years ago, the last target-date, or lifecycle, exchange-traded funds withdrew to a rather ignominious retirement. You remember them, don't you? They were supposed to be one-stop solutions for retirement portfolios which would dynamically allocate assets along a glide path—from higher to lower risk—as an investor aged.

It's not that there was anything inherently wrong with the investment concept. After all, there are still plenty of target-date mutual funds around. Those funds are, in fact, the default choice in many employee retirement plans. The Investment Company Institute says $1.1 trillion was held in target-date mutual or collective funds at the end of 2017.

So how come wrapping target-date strategies inside an ETF didn't accrue assets?

First of all, commissions. Many ETFs can now be bought commission-free through brokerage platforms, but not back then. Brokered target-date ETFs competed with analogs that could be purchased at no additional charge through retirement plans. What's more, most investors didn't even have the option to use ETFs—any ETFs—inside their retirement plans. Those enamored with target-date ETFs would have been compelled to use after-tax savings to buy them outside their employers' plans. Clearly, not enough did.

Target-date ETFs may have disappeared, but asset allocation remains alive and well in the exchange-traded space in the form of target-risk portfolios. Target-risk ETFs allow investors to hold fast to a certain style, e.g., “aggressive,” “moderate” or “conservative,” on a permanent basis. These funds allow investors or their advisors to more directly manage the glide path toward retirement.

Glide Path

The role of target-date funds is to continuously reallocate to asset classes—primarily equity and fixed income—over time. Ideally, they provide the investor with gradual but steady shifts from riskier equity investments into safer fixed-income assets as the retirement horizon approaches. Consider them the spiritual ancestors of today's “robo advisor” platforms.

Target-risk portfolios can also be used to create a glide path, but one that stair-steps onto discrete stages and stays there for a time. Target-risk ETFs put the investor in control of the progress along the glide path.