Tempered growth

Defined contribution plan providers saw a 9.6% gain in assets under record keeping for the year ended June 30, to nearly $2.94 trillion, according to Pensions & Investments' annual survey.

That growth is down from the previous year's 12% growth and one observer said the lower growth rate reflected lower stock market returns during the survey period.

The assets in this year's survey grew from the $2.68 trillion reported in 2004. For the year ended June 30, the Russell 3000 index returned 8.1%; a year earlier, the Russell 3000 returned 20.5%.

Seventy-six providers responded to this year's survey, compared with 80 a year earlier.

Lifestyle funds, target funds and managed accounts drove the growth in assets, according to vendors.

Rick Meigs, founder of 401khelpcenter.com, Portland, Ore., an information site dedicated to 401(k) plans, said those areas are the biggest trends in the DC marketplace. He said providers were more aggressive this past year in rolling out new products and services to gather assets.

"We've been in a mature market for years … anyone that wanted to add a 401(k) has done so already, so the new growth, on the asset side, are in managed accounts and lifecycle options," said Mr. Meigs. "There is an effort to help participants because providers now recognize that participants will never be good investors on the whole. These products allow them to make simple choices," he said.

The 10 largest record keepers accounted for $1.97 trillion, or 67% of the assets, practically unchanged from the 66.8% of the total the top 10 represented a year earlier.

The lineup of the top five record keepers ranked by assets under record keeping in 2005 remained unchanged with Fidelity Investments, Boston, retaining the top spot with $624.7 billion in assets under record keeping. Rounding out the top five were TIAA-CREF, New York; Hewitt Associates Inc., Lincolnshire, Ill.; CitiStreet, Quincy, Mass.; and Vanguard Group, Malvern, Pa.

Making it into the top 10 this year, moving to 10th from 13th, was JPMorgan Retirement Plan Services LLC, New York, with $73.5 billion in record keeping assets — a 25% increase from 2004.

David Embry, managing director, sales and marketing for JPMorgan, said most of the retirement unit's success could be attributed to a select sales model for larger DC plans. "We don't go after just anybody. We want to do new business with plans between $20 million to billions, so we didn't do 500 plan conversions. Most of our growth came from the $50 million to multibillion plan size," he said.

This year, two of the top 10 providers lost assets. Seventh-place Merrill Lynch Retirement Group, Pennington, N.J., lost 2.6% of assets in the latest survey, with $85 billion under record keeping as of June 30. Hartford, Conn.-based ING, in ninth place, lost 1.2% of assets, reporting $74.8 billion in assets.

Cynthia Hayes, first vice president at Merrill Lynch, speculated the slight drop in assets was due to market conditions.

Merrill Lynch saw continued interest in integrated benefits, she noted. "A third of all RFPs want integrated services. They want the consolidation of all retirement and wealth accumulation programs like DC, DB, non-qualified plans and equity awards."

The firm also is seeing interest in managed accounts and lifecycle funds. "It's not only about mutual funds anymore. We need these types of options for unsophisticated investors," she said.

A spokesman for ING did not return phone calls.

John W. Callahan, president of Fidelity Institutional Retirement Services Co., Boston, said the primary driver for Fidelity's growth this past year was new retirement income and managed account products. "We rolled out (discretionary managed account) services to 400 plans in 2005 — through October. There is a real need for a discretionary offering and we expect many more plans to sign up in 2006," he said. Fidelity has a managed account alliance with Ibbotson Associates, Chicago.

Altogether, Fidelity signed on about 700 new plan sponsors this past year and expects an 8% to 10% growth on the plan sponsor and participant side next year, said Mr. Callahan.

The biggest investment trend Fidelity has seen has been its Freedom Fund lifestyle options, said Mr. Callahan. He declined to provide specific growth numbers.

TIAA-CREF saw its assets under record keeping grow 10.5%, keeping its hold on second place.

Edward Van Dolsen, executive vice president of pension product management, said TIAA-CREF had a big year with new products and services, which may have led to the firm's growth. "We began to roll out our new open architecture platform … and we're attaching new services to it," he said. Mr. Van Dolsen said the new platform will boost the firm's asset growth because it has expanded the number of funds TIAA-CREF can offer clients.

TIAA-CREF has added advice services provided by Ibbotson Associates and a new family of lifecycle funds, he said. The new platform will be fully operational by the end of 2006. "We've only converted $20 billion of (DC) assets to the platform and $10 billion on the IRA side. We hope to have the conversion complete by the end of 2006," he said.

P&I also ranks providers by number of plan sponsors and number of participants.

Ranked by number of plan sponsors, Nationwide Financial, Columbus, Ohio, moved up to first place from third with 44,493 plan sponsor clients, a 3% increase. ING moved down a spot to second place, an 18% decline, reporting 41,581 sponsors. Principal Financial Group, Des Moines; John Hancock Financial, Boston; and ADP Retirement Services, Florham Park, N.J., rounded out the top five.

Ranked by number of participants, Fidelity retained its top ranking with 11.6 million, up 6.4% from the year earlier. CitiStreet ranked second with 6.4 million; and Hewitt, third with 5.3 million. Rounding out the top five were TIAA-CREF and ING. The five were almost in the same order a year earlier; the only change was that TIAA-CREF and ING swapped rank.