What is a "target return fund"?

A target return fund is designed specifically to achieve a predetermined return, which is set based on the investment objectives of the fund. This type of fund typically uses various investment strategies and asset allocations to aim for that specific return over a defined time period. Investors are attracted to target return funds as they provide a clear understanding of the performance goal, which can aid in planning their investment strategies accordingly.

In contrast, funds focused on minimizing risk may prioritize capital preservation over achieving a specific return, which distinguishes them from target return funds. Funds that exclusively invest in government securities generally offer lower returns and are characterized by credit risk mitigation rather than targeting a particular investment return. Lastly, funds that distribute dividends on a quarterly basis are more concerned with cash flow to investors rather than achieving a specific target return, as their distribution schedule is based on income generated rather than the attainment of a return goal.