Overall, corporations increasingly seek to take defined benefit plans off their financial statements to reduce their financial risk, Ms. Walton added.
On the defined contribution side, asset growth is being boosted.
Employers that choose to freeze or close defined benefit plans “oftentimes will provide a richer defined contribution plan,” such as higher matching contributions, said Rob Austin, Charlotte, N.C.-based director of retirement research, Aon Hewitt.
Aon Hewitt's latest “Trends & Experience in Defined Contribution Plans” report surveyed plan executives at 400 corporations, whose defined contribution plans have more than $500 billion in combined assets. Some 77% of respondents said a defined contribution plan is their organization's primary retirement plan. That figure is up from 55% in 2003.
The trend could lead to smaller internal staffs at plan sponsors to oversee retirement plan investments.
“Generally speaking you see more staff with defined benefit plans,” as it requires “more guidance and oversight and governance procedures,” Mr. Austin said.
The growth in DC assets is encouraging a move to different investment management structures, consultants said.
“The biggest challenge for the investment management industry today will be how do they ... position themselves in, and have a better broader understanding of, the defined contribution marketplace,” Ms. Walton said.
“Historically many defined contribution plans ... were primarily invested in mutual funds,” she said. “Now we've got significant pools of assets that are more institutionally oriented” in structure, such as commingled accounts and separate accounts, Ms. Walton said.
Of some 250 employers responding to Aon Hewitt's “2015 Hot Topics in Retirement” survey, 30% use some form of a non-mutual fund structure for their investment fund options for participants, Mr. Austin said. By contrast, last year's survey only showed 16% had done so.
P&I's data also demonstrates that change. Among DC plans in P&I's top 200, an average of 28.4% of the assets were in mutual funds as of Sept. 30, down from 30.1% a year earlier.
In terms of asset classes, consultants generally continue to see the vast number of DC fund options focused on traditional investment portfolios and target-date funds.
Only 7% of employers offered a specialty or alternative option, Mr. Austin said, citing Aon's survey.
“We see very few (plans) offering non-traditional (investments),” Mr. Austin said. “Even when they are offered, they are not picked up very much” by participants.
But boutique managers — if not non-traditional funds — are penetrating the ranks of DC fund offerings, consultants said.
“One trend we are seeing a little bit is this idea of white-labeling (customized) funds, creating a fund out of multiple funds or having one manager of multiple managers,” Mr. Austin said. This approach allows non-traditional managers access to DC plans for asset classes “that plan sponsors would not want individuals to be investing in on their own.”
”So there are definitely avenues that we can see for (boutique and alternatives managers) to place their foot into the defined contribution arena,” Mr. Austin added.
Overall, employers will pay more attention to “the defined contribution side, given the level of match (in contributions), given the level of participant investment contributions, in terms of re-evaluating whether or not a participant ... will be able to retire on time,” Ms. Walton said.