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NEW YORK Target-date funds did better than balanced mutual funds in retirement plans and continue to attract investments, Morningstar. the Chicago equity-market researcher, said yesterday.

Target-date retirement funds, also known as lifecycle funds, move money from riskier investments such as stocks to more conservative alternatives like bonds as an investor approaches retirement.

They attracted $45 billion last year as the default investment of choice in employer-sponsored 401(k) retirement plans, the firm said.

Legislators have scrutinized the funds fees, disclosures, and risk structure since some investors lost up to 41 percent in 2008, according to Morningstar, while the Standard & Poors 500 index dropped 38 percent. Several target-date providers have cut shareholder fees and made their asset allocations more conservative as a result, Morningstar said.

Going more conservative could leave the industry open to charges that its fighting the last market battle and not positioning the funds for the future, the report said.

The typical investor in a target-date fund with an expected retirement date from 2031 to 2035 lost 1.93 percent over the past three years, while an investor in a balanced fund, comprised of 60 percent stocks and 40 percent bonds, lost 2.77 percent during the same period, said Laura Pavlenko Lutton, editorial director in Morningstars mutual fund research group

Fidelity Investments, headquartered in Boston, Baltimore-based T. Rowe Price Group Inc.. and Vanguard Group Inc. of Valley Forge, Pa. are the three largest target-date providers by assets, Morningstar said.

In 2008, about 7.3 million Americans held target-date funds, according to the Employee Benefit Research Institutes database of 24 million 401(k) participants.

The funds had a total of $256 billion in assets last year, up from $69 billion in 2005, according to Morningstar.

The top-rated target-date providers based on returns, fees, and management as of December were Los Angeles-based Capital Research & Management Co.s American Funds; American Century Investment Services Inc. based in Kansas City, Mo.; T. Rowe Price; and Vanguard. New Yorks OppenheimerFunds Inc.s target-date funds ranked lowest, according to Morningstar.

The company gathered data on all target-date providers and analyzed 20 of the largest companies by assets, Lutton said.

Investors nearing retirement who continued to contribute to target-date funds the past two years have regained most of their losses from 2008, Charles Schwab Corp. said in a study released last month.

If somebody was consistent throughout the bull market and bear market, they would have made about 97 percent of their losses back as of December, said John Sturiale, a managing director at Charles Schwab Investment Management, of participants in the companys 2010 target-date fund.