Skip to main content
MENU
Subscribe
  • Sign Up Free
  • LOGIN
  • Subscribe
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2023 Defined Contribution East
    • 2023 ESG Investing
Breadcrumb
  1. Home
  2. Print
April 02, 2007 01:00 AM

Window of opportunity opens

Investment-only firms are ready to pounce on unbundling trend

By Jenna Gottlieb
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    As open architecture returns to favor with large defined contribution plans, investment-only firms are prepping new offerings to grab a larger piece of the DC pie.

    Executives at these and other money management firms are betting enhanced asset allocation funds and customized investment strategies will give them that opportunity:

    •Barclays Global Investors, San Francisco, plans to offer more aggressive lifecycle funds and products geared to the distribution phase;

    •Pacific Investment Management Co., Newport Beach, Calif., is launching customized investment portfolios for the DC market; and

    •AllianceBernstein Inc., New York, will launch new customized target-date funds in July.

    Until recently, bundled plan designs were all the rage. But now, as more plan executives scrutinize fees and want increased investment flexibility, the unbundled approach is garnering renewed interest, according to asset management executives.

    Kristi Mitchem, managing director and head of the U.S. defined contribution business at BGI, said the firm plans to roll out new products and services in the next 18 months, in an effort to target large defined contribution plans.

    “We want to be as dominant in DC as we are in (defined benefit). The DC market is coming around to us and it’s time to make a big push,” Ms. Mitchem said.

    At BGI, which had $200 billion in defined contribution assets under management as of Dec. 31 — including $13 billion in its LifePath asset allocation funds — officials continue to see market opportunities for lifecycle funds, Ms. Mitchem said. She also said there has been demand from plan executives for more diversified options within the lifecycle funds.

    “Our market share (of DC overall) is 5%, and we plan to double that in the next five years,” she said.

    On BGI’s list is a focus on enhanced lifecycle funds, distribution products, and possibly investment advice. Plus, BGI will add an emerging markets component to its lifecycle funds in the third quarter, she said.

    “We have REITs, TIPS and now we’re going to add emerging markets” to the funds, she said. “We are also looking at global REITs and global fixed income. But we will not add those classes immediately. It’s something we are looking into.”

    Customized strategy

    PIMCO also plans to roll out a new customized investment strategy. Stacy Schaus, senior vice president and defined contribution practice leader, said PIMCO this month plans to roll out Treasury-inflation protected securities as part of a custom portfolio in a mutual fund or collective trust for defined contribution plans. The portfolio, known as a diversified real asset trust, will include commodities and REITs, she said.

    “We’re see a lot of the assets positioned in the DB market come into DC in a big way,” Ms. Schaus said. One advantage of the PIMCO portfolio: “A plan sponsor will be able to add a single option instead of three,” she said.

    PIMCO’s $60 billion in defined contribution assets as of Dec. 31 accounted for 10% of the firm’s overall book of business, and new DC strategies will allow PIMCO to grow, said Ms. Schaus.

    In July, AllianceBernstein will introduce customized target-date funds, separate from its $342 million retirement-date funds. AllianceBernstein had $15.4 billion in defined contribution assets as of Dec. 31.

    Richard Davies, senior managing director for institutional defined contribution services at AllianceBernstein, said target-date funds are the next wave in open architecture, and disclosure of fees — which is less clear in bundled arrangements — is driving that.

    “That has slowly, but surely, coming to the large plan marketplace. (Target date) is the last holdout in the bundled market. The record keepers are fighting hard for this turf, but more plans see that open-architecture makes sense — for flexibility and cost savings,” said Mr. Davies.

    Mr. Davies said AllianceBernstein will offer large DC plans lifecycle fund strategies with the advantage of customization, including a choice in how much of the portfolio is actively or passively managed. Plan executives will be able to select the passive/active combination and change the mix later, if they choose, said Mr. Davies.

    Most lifecycle fund strategies offered by bundled providers do not offer customization; the funds consist of mutual funds selected by the provider.

    Each target-date retirement portfolio in the series is a daily-priced separate account that invests in a set of collective investment trusts that represent the component asset classes, he said.

    AllianceBernstein portfolio managers will handle the active portion of the new target-date portfolios; Northern Trust Global Investments, Chicago, will manage the passive side. Seth Masters, chief investment officer for blended strategies at AllianceBernstein, said other managers could be added if clients make that request.

    “The ability to add other managers to the mix is important to plan sponsors,” he added, “but many plans would rather not jump into a potentially complicated multimanager target-date structure on day one. They can be added at a later time.”

    AllianceBernstein will target defined contribution plans with $500 million or more in assets, or those plans that would be able to amass at least $100 million in lifecycle fund assets, Mr. Masters said.

    Beyond lifecycle funds

    Other firms are also looking beyond lifecycle funds.

    BGI executives are weighing what kind of distribution products they want to offer. “We need to have a solution for participants drawing down assets. There has been all this emphasis on accumulation, but the focus is changing,” Ms. Mitchem said.

    She added, however, that a partnership with an annuity provider is not on the table because BGI officials have not seen the demand for it.

    Investment advice given by a money manager, which is allowed under the Pension Protection Act of 2006, is on the radar, said Ms. Mitchem. “I would expect BGI to do something in the advice space, but there are some conflicts as the legislation reads now. We will wait for the DOL clarifications,” she said.

    All of the asset managers said that increased scrutiny of defined contribution plans — as they gain importance in retirement programs — is pushing the move back to unbundled approaches.

    “DC was traditionally delegated to the HR and benefits department, but as DC becomes more important to these companies, the people that know the most (about investments) are becoming involved,” Ms. Mitchem said. The renewed interest in DC is in part because of companies freezing their defined benefit plans and enhancing their DC plans, she said.

    Mr. Masters said: “(The Pension Protection Act of 2006) will throw a light on how expensive bundling has been. As plan sponsors begin to recognize the environment today is quite different from a year ago, there is a tremendous willingness to consider rethinking of the bundled model.”

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    The Institutional Investor's Guide to ESG Investing
    Sponsored Content: The Institutional Investor's Guide to ESG Investing

    Reader Poll

    January 25, 2023
    SEE MORE POLLS >
    Sponsored
    White Papers
    The Future of Infrastructure: Building a Better Tomorrow
    Fulcrum Issues: Equity Returns and Inflation — Choose Your Own Adventure
    What Matters Most in Considering a Private Debt Strategy
    Why pursue direct lending in the core middle market?
    Research for Institutional Money Management
    Are Factors a Thing of the Past?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    December 12, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2023. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2023 Defined Contribution East
      • 2023 ESG Investing