Fidelity, while still far and away the biggest DC competitor, saw its assets grow a relatively modest 7.3% to $379.9 billion. While outflows from the Magellan Fund in 2005 depressed Fidelity's gains, John W. "Jack" Callahan, president of Fidelity Institutional Retirement Services Co., said the broader trends for the firm's defined contribution business all remain strong.
The number of plans Fidelity administers totaled 12,000 by year's end; the number of participants in those plans swelled to 12.5 million; and assets under administration rose $21 billion to more than $700 billion — trends that point to strong gains over the long term, he said.
The Magellan Fund, despite renewed attention since Oct. 31, when Fidelity replaced long-underperforming manager Robert E. Stansky with Harry W. Lange, finished 2005 at $30.1 billion, down 27%, or $10.9 billion, from year-end 2004. Those outflows dropped Magellan to third place on the most-used equity fund list, behind American Funds Growth and the Fidelity Contrafund, which grew 32% to $33.5 billion.
T. Rowe Price Group Inc., Baltimore, retained fourth place among the top 25 managers with $60.4 billion in assets, up 12.9%.
Together, the top four firms dominated the rankings for domestic equity funds, accounting for 29 of the 30 biggest funds by assets under management.
Wells Fargo & Co. stayed in fifth place with $31.5 billion, up 17%.
Other movers among the top 10 included Pacific Investment Management Co., Newport Beach, Calif., which rose one notch to sixth place with a 10% rise in assets to $27.8 billion, and Purchase, N.Y.-based Diversified Investment Advisors Inc., whose 24% increase in assets to $25.8 billion lifted the firm to seventh place from ninth.
Executives at both Wells Fargo and Diversified said their firms are seeing increased momentum.
Wells Fargo's acquisition of Strong Capital Management Inc. in late 2004 has given the firm a "broader, deeper lineup" of investment products, enhancing efforts to bolster the firm's relationship management process, said Douglas Murray, senior vice president of Wells Fargo Institutional Trust Services, Minneapolis. For 2005, the firm handily exceeded its sales targets, he said.
Joseph J. Masterson, a senior vice president with Diversified Investment Advisors, said that increasingly, "we have gone from a player that people have thought of as operating in the middle market to a player that operates in the mid- and large market," taking on clients now that have more than $1 billion in plan assets such as Houston-based Cooper Industries Ltd.
Franklin Templeton Investments, San Mateo, Calif., remained in eighth place.
Finally, Oppenheimer Funds and Merrill Lynch Investment Managers, both of New York, broke into the top 10 rankings, with $22.1 billion, up 12%, and $21.9 billion, up 15%, respectively.
Falling out of the top 10 were Janus Capital Group, Denver, and Putnam Investments, Boston. Despite improved investment performance at both companies, Janus dropped to 14th place from 10th on a 12% decline in its DC assets to $17.4 billion, and Putnam tumbled to 15th place from sixth, as its assets fell 36.5% to $16.7 billion.
Blair Johnson, a Janus spokesman, said that after a slow start in 2005, "our defined contribution assets stabilized by midyear and we ended the year with our best quarter of net (defined contribution) sales in some time."
Putnam spokeswoman Nancy Fisher, citing new products her firm has introduced for the defined contribution marketplace, said, "We're confident that net flows will improve by the end of the year, based on increased client activity and strong performance in a range of Putnam funds."
Executives at the top-ranking firms cited continued growth in demand for total retirement outsourcing and target-date funds as factors behind their growth.
With a growing number of big corporations freezing or closing their defined benefit plans and enhancing existing defined contribution plans, several predicted that recent momentum could pick up further.
"It's just beginning," but the number of companies freezing their DB plans and making their DC plans richer should increasingly boost the level of inflows from existing clients, said Vanguard's Mr. Mullane.
Mr. Callahan said efforts to make defined contribution plans more effective, including several pushed by Fidelity such as auto-enrollment and the use of lifestyle funds as default options, are being adopted by more plans, further bolstering the outlook for the defined contribution market.
