Defined contribution assets under management in 2010 reached $3.67 trillion, rising 12.6% from the previous year but falling just short of the $3.7 trillion peak reached in 2007, according to the latest Pensions & Investments annual survey of DC managers.
Internally managed assets rose 13.3% to $3.3 trillion vs. $2.91 trillion for the previous year. The 2010 figure exceeds the previous peak of $3.25 trillion at year-end 2007.
Aggregate asset allocation changes were modest for the latest survey period, which ended Dec. 31, 2010. Among the largest investment categories for internally managed assets, equities accounted for 53.9%, up from 53% the previous year; fixed income declined to 21.2% from 22.9%; and stable value slipped to 13.6% from 14.2%. Also, cash declined to 5.1% from 5.6%; alternatives remained steady at 1.4%; and “other” increased to 4.8% from 2.9%.
Consultants said asset gains in 2010 were due to a combination of added contributions and better market performance — with performance being most important.
“I don't think participants have changed their contribution patterns much,” said Jennifer Flodin, co-founder and chief operating officer of Plan Sponsor Advisors, a Chicago-based retirement consulting firm. With retirement savings, “participants set it and forget it.” Ms. Flodin said participants also are benefiting from some companies reinstating corporate matches.
Participants aren't abandoning equities even though equity allocations in 2010 were much lower than in 2007, Ms. Flodin said. At year-end 2007, P&I's survey showed a 63.7% allocation to equity.
“I don't think people will forget what happened in 2008 and 2009, especially those who were at or near retirement,” she said. “They're saying "I know there's risk (in equities), but if I put it all in stable value, I'll never have enough money to retire.'“
Lori Lucas, executive vice president and defined contribution practice leader at Callan Associates, said research by her San Francisco-based firm showed that assets for the average DC plan grew 14.73% during 2010 and 82% of the increase came from market gains. The rest came from a combination of additional company and participant contributions. “The typical way participants manage their portfolios is through inertia,” she said.
The P&I survey showed internally managed target-date fund assets surged in 2010, reaching $303.16 billion, up 51% from 2009. Custom target-date assets nearly quadrupled to $11.42 billion from $3.02 billion in 2009.
Throughout the economic crisis and continuing through today, Callan's research indicates “there's never been a net quarterly outflow from target-date funds,” Ms. Lucas said. Last year, as retirement money continued flowing into target-date funds, the biggest sources of outflows were from company stock and domestic large-cap equity funds, she said.