Vanguard jumped past Fidelity to become the largest manager of U.S. defined contribution assets, a post Fidelity had held since 1998, Pensions & Investments' annual survey of money managers shows.
Only about $1 billion separates the two powerhouses. Vanguard Group reported $613.47 billion in DC assets as of Dec. 31, and Fidelity Investments, $612.39 billion.
Vanguard's defined contribution assets surged almost 28% in 2013, compared to a $16.9% gain for Fidelity.
Vanguard's DC assets doubled since 2009; Fidelity's rose 35.4%, according to P&I data.
Defined contribution consultants said Vanguard's DC AUM growth is due primarily to industry trends of plans offering more index funds and target-date funds — two strong points for Vanguard — as well as to the name recognition for the company as a provider of low-fee investment options.
As for Fidelity, consultant Jennifer Flodin, co-founder and chief operating officer of Plan Sponsor Advisors, said Fidelity officials “recognized performance was below their own expectations with target-date funds, and they have adjusted their portfolios to achieve performance objectives.”
Fidelity's efforts include reducing index target-date series fees and making some glidepath alterations, she said. “There is recognition that something had to change,” she added.
Michael Shamrell, a Fidelity spokesman, said Fidelity executives declined to comment.
Ms. Flodin also noted that Vanguard has benefited from DC plan executives' growing interest in open architecture — the unbundling of investment options from record keeping. “There has been acceptance of Vanguard funds on other record-keeping platforms,” she said.
Christopher McIsaac, managing director and head of Vanguard's institutional investor group, said his company has capitalized on what he called the “dominant themes” of the DC industry in recent years — a “broad adoption” by DC plans of index funds and of target-date funds. He declined to comment on Vanguard's growth vs. that of Fidelity.
Vanguard also has benefited from the unbundling of defined contribution plans, a trend Mr. McIsaac calls “an industry transformation.”
