Target-date fund allocations in defined contribution plans soared in 2014, climbing to 22% of plan assets from 15.7% in 2013, said a Northern Trust survey of 100 DC plan clients with $265 billion in total assets.
Target-date fund assets remained in second place among asset allocations, trailing the 33.6% allocation to U.S. equity, down from 35.6% in 2013.
Among 11 broad asset categories tracked by Northern Trust, the combined stable value/money market category placed third with 11.6%, down from 14.6% in 2013.
The target-date asset growth has been fueled in part by DC plans re-enrolling participants, Jim Danaher, managing director for DC solutions, said in an interview. Those re-enrollments — into target-date fund default options — also played a role in the declining presence of stable value and money market funds.
Mr. Danaher said asset allocations to target-date funds will see strong increases this year, adding that re-enrollments, especially among larger plans, also should increase.
John O'Connell, a company spokesman, said in an interview that the asset growth in the target-date funds was due to a combination of new cash flows and market appreciation, but the survey didn't distinguish specific roles in the asset growth.
The surge in target-date fund assets was aided by strong cash flows into the investment option as 32.7% went into the strategies last year among Northern Trust clients, the report said.
Among other asset categories, 19.1% of cash flows went into equities, while fixed income (16.7%) and international equity (12.3%) also received double-digit percentage flows. By contrast, 5.3% of cash flows moved into stable value and money market funds.