U.S. urged not to tamper with target-date funds

* Funds say govt shouldn't dictate mix of investments

* Say meddling in asset mix would be unprecedented

* SEC says recent fund performance raises questions

* SEC staff reviewing disclosure of asset allocations

WASHINGTON, June 18 (Reuters) -The U.S. government should not dictate how fund managers allocate assets in target-date funds, which have become increasingly popular among investors saving for retirement, mutual fund industry executives said on Thursday.

The plea came in the wake of dramatic losses at many of the funds in 2008, including funds designed for investors nearing retirement, because of heavy exposure to stocks.

Securities regulators and the Department of Labor are examining target-date funds, whose mix of assets typically becomes more conservative as the fund nears its target date.

The mutual fund trade group, the Investment Company Institute, told a public hearing that government agencies should not regulate how target-date fund managers allocate assets among stocks, bonds, cash and other investment categories.

"In the 70-year history of mutual fund regulation, the government has never regulated the investment choices of mutual funds," said ICI General Counsel Karrie McMillan. "Nor should it start now."