Asset flows into TDFs showed no sign of slowing down in the fourth quarter of last year, as AUM reached new highs of $485 billion — a 29% increase over the previous year — according to a report by Ibbotson Associates. The Big Three — T Rowe, Vanguard and Fidelity — held 69% of the pie, with others like John Hancock, Wells Fargo, American Funds and TIAA-CREF growing. Overall, 75% of TDFs showed positive flow.
TDFs have grown a stunning 43% a year since 2000, so 2012 was down a bit compared with the three-year average of 25%. While TDFs have been a boon to the DC industry, and most investors are better offer in them rather than money markets or picking their own funds, they do pose two challenges: Asset managers that don’t have TDFs may be left out in the cold, and participants are squeezed into a one-size-fits-all bucket. Meanwhile, the DC market continues to embrace packaged TDFs compared with glide paths or LDI, for example.
