PIMCO survey says DC plan revenue sharing fading
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Varagon Capital fills new business development role
      Fitch Group in deal to acquire CreditSights
      Credit managers’ outlook still gloomy but brightening – survey
      Digital Colony picks head of Europe capital formation
    • Will Martindale
      Cardano Group chooses group head of sustainability
      Meketa hires first chief marketing officer
      Nick Horsfall
      Redington names managing directors for investment consulting team
      Marsh & McLennan Agency sets sights on Compass Financial
    • New York State Common challenges Tyson’s dual-share stock structure
      Credit managers’ outlook still gloomy but brightening – survey
      Investors call for action on COVID-19-induced humanitarian crisis at sea
      U.S. jobs worker restaurant
      Job market slipped in December as virus surge hindered activity
    • Ascensus, Empower acquire Truist record-keeping business
      PCS Retirement acquires Alliance Benefit Group-Rocky Mountain
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • New law requires MassPRIM to increase diversity of managers, consultants
      Impact investors getting savvier, more efficient – report
      SSGA alum named head of ESG at Mirova
      Aegon moves to cut carbon from workplace DC business
    • Blackstone holiday video
      Blackstone would like to show you how things are done around the office
      Galina Churkina
      Building research earns honor from Aquila Capital
      MacArthur Foundation invests in women’s safe housing fund
      CAIA’s expansion to online exams yields big results
    • Shanghai skyline
      Global hedge funds struggle even in a more open China market
      The Sun Hung Kai Properties Ltd. logo is displayed on the Sun Hung Kai Centre building in Hong Kong on Sept. 13, 2018
      SHK spins out East Point Asset Management
      Man holding a business card with Hedge Fund written on it
      Hedge funds chalk up decade’s best returns in 2020 – HFR
      New hedge fund launches surpass liquidations in third quarter
    • New York State Common challenges Tyson’s dual-share stock structure
      A sign on the exterior of a Northern Trust Corp. branch in Chicago on July 13, 2017
      Northern Trust to cut 500 jobs
      Wells Fargo targets $8 billion in cuts
      Maine Public Employees boosts target to alternative credit
    • A sign on the exterior of a Northern Trust Corp. branch in Chicago on July 13, 2017
      Northern Trust to cut 500 jobs
      Wells Fargo targets $8 billion in cuts
      A sign at a China Telecom Corp. store in Shanghai on Jan. 6, 2021
      Managers make further divestments from sanctioned Chinese firms
      The Chinese flag flies in front of the Liaison Office of the Central People's Government in Hong Kong on May 22, 2020
      Standard Life Aberdeen JV to open mainland China pension insurance company
    • Maine Public Employees boosts target to alternative credit
      Los Angeles City Deferred Comp narrows list to 2 in manager search
      Connecticut pension fund CIO resigns
      Arizona State Retirement looking for CIO
    • Sharmila Chatterjee Kassam
      AIF Institute hires former Texas ERS deputy CIO as executive director
      Varagon Capital fills new business development role
      SSGA alum named head of ESG at Mirova
      Capital Group hires BlackRock executive to launch ETF unit
    • Pension funds continue private equity investing spree
      Big jump in private equity AUM expected over next 5 years
      Thoma Bravo takes in $22.8 billion for 3 funds
      Jason Thomas
      Data, technology become new prized possessions
    • Ivanhoe Cambridge Inc. signage is displayed outside the company's office near Bay Street in Toronto on Aug. 29, 2011
      Ivanhoe Cambridge, PAG announce joint venture for Japan logistics investments
      Residential buildings in Hong Kong on Feb. 20, 2020
      KKR closes first Asia-Pacific real estate fund at $1.7 billion
      CPPIB in deal with Greystar to develop U.S. housing
      Global real estate investments to hit $79 billion in 2021 – survey
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Neal and Brady
      Retirement security could be only issue both sides accept
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Outlook 2021
      The top 10 stories of 2020
      The best places to work in money management
      Investment consultants
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • San Jose Federated commits $11 million to real estate fund
      Essex Pension Fund on the lookout for private debt manager
      Lexington Contributory wants large-cap equity manager
      Fort Lauderdale fund scouting for large-cap manager
    • San Jose Federated commits $11 million to real estate fund
      Essex Pension Fund on the lookout for private debt manager
      Lexington Contributory wants large-cap equity manager
      Fort Lauderdale fund scouting for large-cap manager
    • International Small Cap Manager Services
      Financial Expertise
      Passive Index Manager Services
      Emerging Markets Equity Investment Management Services
    • U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
      Hedge funds warming up to financial sector, remain long U.S. equities
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Retirement cartoon
      Hopes rising for retirement readiness in 2021
      view gallery
      25 photos
      2020 in editorial Cartoons
      view gallery
      25 photos
      Cartoons depict a year like no other
      Consultants cartoon
      Seeking an investment consultant? Caveat emptor
    • Climate change and emerging markets after Covid-19
      An Asset Owner's Guide to Multi-Manager Portfolio Management
      Research for Institutional Money Management
      The Future of the U.S. Dollar - Dominant currency or one of many?
    • Michael McNally
      Commentary: New ‘investment-plus’ test poses risks to private equity investors
      Adam Waterous
      Commentary: Institutions urged to act now on opportunities created by current global oil disruption
      Ron Lagnado
      Commentary: Straw man critiques don’t hold up in face of real world success
      Robert Raben
      Commentary: What the asset management industry must do to bolster diversity
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
      Sponsored Content By Aberdeen Standard Investments
      Taking a passive approach to the hedge-fund universe
      Sponsored Content By World Gold Council
      Gold: the most effective commodity investment
      Sponsored Content By Moody's Analytics
      The Industrialization of ESG Investment
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:24
      U.S. stocks were 2020’s comeback kid
      watch video
      1:23
      Outlook 2021
      watch video
      1:52
      Buy gold's pullback?
      Coronavirus and the S&P 500: 2020
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
    • POLL: Retirement issues in 2021
      POLL: Money managers' priority in Asia-Pacific region
      POLL: Retirement issues in the presidential election
      POLL: The S&P 500 in the third quarter
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Graphic: U.S. stocks were 2020's comeback kid
      U.S. fixed-income returns post another positive year
      By the Numbers
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
      The Institutionalization of Retail Part Two: A Webinar Series from P&I Content Solutions and Chestnut Advisory Group
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. DEFINED CONTRIBUTION
April 01, 2013 01:00 AM

PIMCO survey says DC plan revenue sharing fading

New federal fee-disclosure rules behind reduction

Robert Steyer
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Stacy Schaus believes litigation had an impact on survey responses.

    A survey of consultants serving defined contribution plans with $2.4 trillion in combined assets offers an emphatic prediction that new federal fee-disclosure regulations will spur executives to reduce or drop revenue sharing.

    The survey, to be released April 1 by Pacific Investment Management Co., also offers a broad and detailed pulse-taking of other key issues in the DC industry ranging from asset allocation to plan management.

    “Clearly, plans are moving to mutual funds with zero revenue sharing and to collective investment trusts with zero revenue sharing,” said Stacy Schaus, executive vice president and defined contribution practice leader of Newport Beach, Calif.-based PIMCO, in an interview. “We believe this trend will continue.”

    When asked about the impact of regulations requiring fee disclosure to plan sponsors by providers, 85% of consultants said they expect an increase in the use of mutual funds with zero revenue sharing.

    In addition, 81% of consultants said they expected an increase in the use of collective investment trusts, and 53% predicted a greater use of separate accounts to reduce the impact of revenue sharing.

    The larger the plan, the more likely it will use a separate account, Ms. Schaus said. Although the survey didn't ask consultants about the asset size of DC plans seeking to reduce or eliminate revenue sharing, Ms. Schaus said the largest plans are leading the way, but other big plans are also taking action to reduce or eliminate revenue-sharing.

    Consultants also predicted a big drop in sponsors' use of high-revenue-sharing mutual funds, the survey said.

    Ninety percent forecast a decrease or a significant decrease in sponsors offering mutual funds whose revenue sharing exceeded 25 basis points. Some 68% predicted a decrease or a significant decrease in sponsors' use of mutual funds with revenue-sharing costs of 10 basis points to 25 basis points.

    Fee-disclosure regulations also play a role in guiding the biggest source of business growth for consultants, Ms. Schaus said. When asked which services had grown the most over the past year, 67% of consultants cited total plan cost or fee studies, 51% identified record-keeping searches and 43% referenced investment design.

    Although these growth sources also were cited most often in the two previous annual PIMCO surveys, Ms. Schaus said the latest answers “were definitely related” to fee disclosure rules and to litigation.

    “Sponsors are hiring consultants to evaluate fees,” she said. “This goes hand in hand with the fee-disclosure regulations that raised their awareness.”

    Low rates are a 'challenge'

    The PIMCO survey also revealed considerable discomfort among consultants about the use of capital preservation options over the next several years. “We know capital preservation is challenged now due to the low (interest) rate environment,” Ms. Schaus said.

    For example, 84% of consultants said they were concerned or very concerned about money market funds producing nominal or negative returns because of low interest rates. Also, 61% worried about potential new regulations such as establishing a floating net asset value for money market funds.

    If new net asset regulations are approved, the survey said the likely or most likely response by plan executives (48%) would be to keep the money market fund. The next choice (41%) would be replacing the money market fund with stable value.

    However, consultants also fretted about stable value, with 80% concerned or very concerned about wrap fees and wrap capacity — the cost and availability of the insurance that guarantees the book value of the underlying investments. In addition, 76% said they were concerned or very concerned about stable value funds being closed to new DC clients or being liquidated.

    The survey noted that consultants have changed their views about what asset class or strategy would be a valuable addition to a plan's investment lineup.

    Emerging market debt was the top choice, cited by 61% of consultants. Second was commodities (49%), followed by risk-mitigation strategies such as tail-risk hedging (45%), high-yield fixed-income securities (39%) and real estate investment trusts (35%).

    In the previous two surveys, the leading choices were Treasury-inflation protected securities, emerging markets equity and commodities. In the current survey, TIPS ranked ninth with 29%. “TIPS is no longer new,” Ms. Schaus said.

    Among market risk-mitigation strategies, the most popular choice for consultants — according to 81% of respondents — was the use of inflation-protection strategies such as TIPS, commodities and REITs, the survey said.

    Consultants also said the largest DC plans are most likely to seek a target-date fund separate from the one offered by their record keeper. For plans with more than $1 billion in assets, 89% of consultants forecast a “decoupling” of the target-date funds to a “significant extent.” For plans with assets between $500 million and $1 billion, 79% of consultants predicted a decoupling to a “significant extent.”

    Among the survey's other findings, consultants said:

    cGlidepath structure, quality of underlying investments, diversification of underlying investments and fees were the most important factors in selecting default strategies. Performance placed 10th. “The real story is risk management,” Ms. Schaus said.

    cA core lineup of both active and passive funds was recommended by 94% of respondents, while only 22% advocated a passive-only core lineup and 14% recommended an active-only core lineup.

    cThe biggest factors that might cause a greater interest in passive investment in DC plans are lower costs (98%), fear of fee litigation or other legal concerns (76%) and a perceived reduction of fiduciary risk (54%).

    Related Articles
    Plans, providers proactive on fee regulations
    DC plans cutting costs using 'big stick' of fee disclosure
    DC record keeper assets climb to all-time high
    Fees could drive DC plans to adopt ETFs
    Plan execs, managers stick with stable value
    Attention defined contribution participants: Beware of being the patsy!
    DC plan costs continuing to decline, survey shows
    Recommended for You
    Ascensus, Empower acquire Truist record-keeping business
    Ascensus, Empower acquire Truist record-keeping business
    PCS Retirement acquires Alliance Benefit Group-Rocky Mountain
    PCS Retirement acquires Alliance Benefit Group-Rocky Mountain
    Annuities coming to target-date funds, but not right away
    Annuities coming to target-date funds, but not right away
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Climate change and emerging markets after Covid-19
    An Asset Owner's Guide to Multi-Manager Portfolio Management
    Research for Institutional Money Management
    Bond ETFs show maturity during Covid market mayhem
    Global gold-backed ETFs: A popular gateway to the gold market
    The Future of the U.S. Dollar - Dominant currency or one of many?
    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

    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.

    pilogo-NEW
    About Us

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

    Chicago Office
    150 N. Michigan Ave.
    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 © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center