Invesco Ltd. and Pacific Investment Management Co. are adding riskier assets and complicated strategies in target-date funds as they seek to gain ground on Fidelity Investments and Vanguard Group Inc. in this fast-growing segment of the U.S. retirement market.

While sellers promote the funds as a simple choice for people who don't want to pick their own investments and rebalance them, money managers are using inflation hedges and derivatives to bolster returns. That broadening doesn't address target-date funds' main issues: uneven returns, higher expenses and an inability to provide for individual retirement needs, said Bob Pozen, a senior lecturer of business administration at Harvard Business School and former chairman of MFS Investment Management.

Target-date mutual funds hold a mix of assets that become more conservative as employees age, which is why employers favor them when automatically enrolling workers in 401(k) retirement plans. Investments in the funds have swelled more than 380 percent since 2005 to about $343 billion as of September, according to the Investment Company Institute, a Washington-based trade group for the mutual-fund industry.