Providers of mutual funds and target-date funds for defined contribution plans saw their assets under management rise during the year ended June 30, thanks to the market recovery that allowed them to partially make up for the previous year's losses.
For the 12 months ended June 30, the annual survey conducted by Pensions & Investments found that proprietary mutual fund AUM increased 6.7% to $3.58 trillion. The previous year saw AUM plummet by a 19.8%.
Meanwhile, proprietary target-date AUM posted a double-digit increase in the year ended June 30 to $2.64 trillion, an impressive recovery from the 9.7% fall the previous year.
Among target-date funds, those using mutual funds posted an 8.7% gain in AUM to $1.16 trillion.
For collective investment trust-based target-date funds, the AUM increased 15% to $1.26 trillion, the second year in a row that CIT-based target-date funds exceeded mutual fund-based funds.
The separate account category gained 14.7% to $219.8 billion.
The rise in AUM across all categories reflected a market recovery for the year ended June 30 that seemed all the more dramatic given the double-digit negative returns for both public equities and fixed income during the prior year.
For the year ended June 30, the Russell 3000 and Bloomberg U.S. Aggregate Bond index returned 19% and -0.2%, respectively, well above their respective returns of -13.9% and -10.3% for the year ended June 30, 2022.
Sean McCaffery, senior defined contribution research specialist at Fiducient Advisors, said in an interview that clients "continue to see the lion's share of participants go toward target-date funds."
Citing target-date fund lineups as a kind of "one-stop shop," McCaffery said other trends are also continuing, including the broader implementation of passive strategies to save fees as well as provide a safe option from a litigation standpoint.
McCaffery said also that blend or hybrid target-date funds, which offer both active and passive strategies, are starting to gain some traction now.
Some more investment-savvy committees that might also oversee defined benefit plans or endowments are seeking to be active in more inefficient asset classes and passive in efficient asset classes within target-date funds, he said.
"Certainly those are still dwarfed by passive flows," he said.
Meanwhile, participants are reacting to the market's improvement, consultants say.