48% of DC assets in target-date funds by 2020, Casey Quirk predicts

Target-date funds will account for 48% of all U.S. defined contribution assets by 2020, well above the 12.5% they represented last year, according to a forecast from Casey Quirk & Associates.

Target-date funds will account for an estimated $3.7 trillion of the projected $7.7 trillion in DC assets by 2020, compared to about $550 billion of the $4.4 trillion in DC assets last year, according to Casey Quirk.

In an interview, David Bauer, a partner in the firm, said the growing presence of target-date funds will be due primarily to sponsors’ plan designs, adding that “success (of these funds) is driven by the QDIA option.”

According to his firm, the second-biggest source of DC assets in 2020 will be target-risk/balanced funds with $1.2 trillion, or triple the amount in 2010. The asset class with the biggest decline will be U.S. equity, down to $1.1 trillion in 2020 from $1.4 trillion last year.

Most of the total DC asset growth will come from market gains, Mr. Bauer said, although he didn’t say what percentage would come from market returns.

Mr. Bauer said his firm’s forecast for total DC asset growth and the expanding role of target-date funds is based on some 50 variables and projections.