WASHINGTON -- As dark as this recession has been, it's had an upside in that it has exposed myriad problems in the investing industry.

Take, for example, "target date" investment funds, which were created to help investors achieve the right mix of asset classes.

I'm a fan of the funds because they allocate your money among various asset classes and automatically shift from riskier investments to more conservative ones as you reach a certain "target" period, such as retirement.

At the end of 2008, $109 billion invested in target date mutual funds was held in defined contribution plans, such as 401(k) plans, according to the Investment Company Institute.

Think of target date funds, which are also called lifecycle funds, as operating like the "set it and forget it" machines that allow you to roast chicken with little effort. The idea is that you don't have to closely monitor your investment account because the asset allocation and rebalancing is done for you. It's why the Department of Labor endorsed the funds, allowing them to be one of the default selections in 401(k) plans.

However, the recession and the resulting downturn in the stock market have illuminated a problem with target date funds, including how people perceive them.

The U.S. Senate Special Committee on Aging held a hearing earlier this year in part to discuss target date funds within 401(k) plans. A committee investigation of funds designed for people planning to retire in 2010 found a broad variety of stock exposure -- and losses -- although the funds had the same target date.

It's this wide berth that worries the Department of Labor's Employee Benefits Security Administration and the Securities and Exchange Commission. The two agencies held a hearing last month to discuss concerns about how target funds are managed and marketed.

"We have serious concerns that these funds are fundamentally misleading to investors because they are allowed to be managed in ways that are inconsistent with reasonable expectations that are created by the titles in the use of the names," testified Marilyn Capelli Dimitroff, chair of the Certified Financial Planner Board of Standards.

The average loss in 2008 among 31 funds with a 2010 target date was almost 25 percent. Returns of 2010 target date funds in 2008 ranged from minus 3.6 percent to minus 41 percent, SEC Chairman Mary L. Schapiro said during the hearing.

"These varying results should cause all of us to pause and consider whether regulatory changes, industry reforms or other revisions are needed with respect to target date funds," Schapiro said. "Of all of the issues that the SEC is examining at the moment, our review of target date funds is one that may most directly affect everyday Americans seeking to access our securities markets to help build a better life, and a greater sense of financial security, for themselves and their families."

No question federal regulatory agencies owe us an examination of target date funds. Have the hearings. But please, oh please, if regulation is necessary, make sure it really benefits the average investor.

One thing officials can do is make sure investment companies are thoroughly explaining the nuances of target date funds. Continued...