TDFs Top $1 Trillion, Still Concentrated

Despite rapid growth, a new research report notes that a handful of recordkeepers continue to dominate the target-date fund market.

The Sway Research report, “The State of the Target Date Market: 2016 — Assessing the QDIA Behemoth a Decade After Passage of the Pension Protection Act,” notes that as of the end of 2015, more than three of every five dollars invested in a target-date mutual fund or collective investment trust (CIT) was controlled by one of three financial services firms: Vanguard, Fidelity, and T. Rowe Price. The report notes that, not coincidentally, each of these firms also possesses a leading DC recordkeeping business.

Vanguard, which boasts low-cost passively managed target-date portfolios, is the most dominant target-date player at present, managing nearly a third of the $1.1 trillion of target-date mutual fund and CIT assets within its proprietary offerings.

BlackRock is the only firm among the top 10 in market share of target-date mutual funds and CITs that does not have a DC product or platform, according to the report. Additionally, even though only 53% of target-date mutual funds and CITs invest exclusively in the proprietary funds of the series sponsor, products of this type held 89% of the assets at the end of 2015.

‘Through’ Ways

The study notes that more than four of every five target-date dollars is invested in a series that features a “through” retirement glide path, though it claims that the term “through” is very much subjective; more than half of these assets are in products that realize their equity landing point (the point at which they reach their lowest equity allocation) within 15 years of reaching the target, according to the report.

While the target-date market remains incredibly challenging for financial services firms that lack a DC recordkeeping business, the report notes that opportunities are available via open architecture multi-manager products from retirement plan recordkeepers, advisors, and consultants.

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