Investment-only assets in private DC plans — primarily corporate 401(k) plans — should reach about $1.95 trillion by year-end, or about 60% of the non-public-plan DC market, Cerulli Associates reports.
The report also notes that investment-only providers can maintain higher profit margins because they don't have the “burden of supporting a record-keeping system.”
Except for a drop in 2008, investment-only DC assets have grown every year since 2003 when they were $962 billion and are expected to have doubled between 2003 and year-end 2010, the report said.
But Cerulli warned that providers must be selective in choosing the best market. Custom target-date funds for DC plans with more than $100 million in assets are prime targets, according to the report, The Cerulli Edge Retirement Edition for second quarter. 2010.
“Asset managers that are properly positioned … will reap the rewards,” the report said.
Among specific funds, the report said the best opportunities for DC investment-only providers within the next two years will be fixed-income funds and open architecture target-date funds, according to responses from DC plan providers and asset managers, said Tom Modestino, associate director of research, in an interview. Respondents said the weakest areas will be managed accounts in DC plans, he added. The report didn't cite reasons for respondents' comments about the best and worst opportunities.
Cerulli Associates said its report was based on proprietary surveys and asset-modeling.