For most money managers of defined contribution assets, 2018 will go down as a year they'd rather forget.
Money managers posted an overall decline in their defined contribution assets at the end of 2018, dropping 5.4% to $6.693 trillion from $7.076 trillion the year before, according to Pensions & Investments' annual survey of the largest U.S. institutional money managers.
Among the top 25 managers, all but three — Vanguard Group Inc., T. Rowe Price Associates Inc. and Mercer Investments LLC — showed declines in assets, with five posting double-digit drops in asset value.
The declines were due in large part to last year's market downturn in the fourth quarter, according to industry experts.
"I think the decline in assets simply mirrors the performance of the capital markets and the asset mix of defined contribution plans," said Michael Volo, senior partner at Cammack Retirement Group Inc. in Wellesley, Mass.
Jason Shapiro, director of investments at Willis Towers Watson PLC in New York, noted that global equities, as measured by the MSCI ACWI, slid 9.4% in 2018, while the Bloomberg Barclays U.S. Aggregate Bond index was flat for the year.
The fact that defined contribution plans tend to be equity-heavy didn't help, Mr. Shapiro said. Target-date funds, which are popular in defined contribution plans, have high equity weights with median return-seeking allocations for participants 40 years to retirement at 90%, according to Willis Towers Watson's target-date research team.
Few money managers escaped the wrath of the market, regardless of whether they employed passive or active strategies, P&I's survey showed. State Street Global Advisors, a passive manager, for example, suffered a 10.64% decline in assets, while Fidelity Investments and Nuveen, both predominantly active managers, endured drops of 6.78% and 4.77%, respectively.
State Street's assets fell to $297.27 billion, ranking seventh among the largest DC money managers. Fidelity and Nuveen, meanwhile, saw assets slide to $666.4 billion and $507.78 billion, respectively, putting them in third and fourth place.
Vanguard, T. Rowe Price and Mercer, however, bucked the trend. Vanguard, a leader in passive investing, managed to boost assets by 2.88% to $1.18 trillion, while T. Rowe Price, mainly an active manager, pulled off a 2.62% increase, bringing its assets to $413.1 billion to remain in fifth place for managing DC assets.
Mercer, a firm that manages none of its defined contribution assets internally, delivered the biggest jump; its assets increased 13.75% to $54.6 billion in 2018.