Target date funds to capture 63% of 401(k) contributions by 2018

The popularity of target date funds continues to gain momentum and will soon absorb the majority of 401(k) contribution, according to a study released Wednesday.

By the year 2018, target date funds will attract 63.4% of 401(k) contributions, and will constitute 35% of total 401(k) assets, the Cerulli Associates Inc. study predicts.

"Asset managers must have a strategy in place to grow target-date assets; otherwise they risk irrelevance in the defined-contribution market," the report said.

(See also: Advisers' role in target date funds grows more complex.)

Target date funds' most appealing characteristic by far is risk management and asset allocation expertise, according to Cerulli. This feature was cited as a very important quality by 84% of respondents; 42% mentioned the funds' diversity of asset classes.

“The funds let you choose a portfolio that matches your retirement date, and adjusts the portfolio allocation over time so that you always have the appropriate level of risk,” said Wyatt Lee, a vice president at T. Rowe Price Group Inc. “This solves some of the constant mistakes that investors often make on their own.”