HARTFORD, Conn. - Mutual funds now have a bigger market share than insurers in the pension fund industry - but lead by a smaller margin than many might think, according to a recent study by Conning & Co., Hartford, Conn.
In its study, Pension/Retirement Assets Business, the position of fund companies in the $5 trillion retirement market has risen to a 45% share of assets at the end of 1995 from 36% in 1990.
But a major portion of the shift can be explained by market appreciation. After adjusting for the stock market's rise, probably half of the gain was from market appreciation, according to Mark Trencher. Mr. Trencher is assistant vice president of Conning and head of the team that wrote the study.
The market share of insurance companies dropped to 20% from 30% since 1990, but after adjusting for market appreciation the drop was only about 3%, Mr. Trencher said.
Indeed, while many insurance companies have failed to capitalize on the popularity of defined contribution plans, a number have bought mutual fund companies or struck alliances with them.
This prompted Conning to subtitle the study "Sleeping with the Enemy."
The Conning report concludes that a down stock market cycle will heighten the relative attractiveness of stable value and other insurance products compared with equity-oriented mutual funds.
"With double-digit growth likely for the next few years at least, and probably a stock market correction to take the bloom off the equities investments mutual funds offer, there will certainly be a big place in this market for aggressive insurance companies," Mr. Trencher said.
"Add to this their established distribution systems and they could certainly dominate the small business market, too," he added.