Defined contribution assets in the U.S. are expected to grow about 34% to $5.5 trillion by 2015, and with the increase in assets will come a move toward more passive management, according to a McKinsey & Co. report.
The report also anticipates that target-driven solutions such as target-date and lifecycle funds will account for 60% of DC assets by 2015, Celine Dufetel, a partner in McKinsey's retirement practice and an author of the report, said in a telephone interview.
Ms. Dufetel said the DC industry is changing rapidly because of the increasing complexity of the plans, regulations and cost, and because DC plans are becoming the primary vehicle for retirement savings.
Ms. Dufetel said the shift toward DC plans also will drive a shift in asset allocation among those plans toward more passive investments. Passive investments have lower fees and are less of a fiduciary burden for their managers, she said.
“Passive assets in 2006 represented only 9% (of DC investments) and we've seen that rise to 14% in 2009,” she said. McKinsey projects that passive investments will represent 25% of DC portfolios by 2015.
McKinsey spokeswoman Allison Cooke Kellogg said the report, “Winning in the Defined Contribution Market of 2015,” will be available on the McKinsey website, http://www.mckinsey.com, during the week of Oct. 4.
