Vanguard Group on Friday said it was cutting to $5 million from $100 million the minimum investment a defined contribution plan would need to qualify for the company's target-date retirement funds, effective immediately. The change primarily affects 401(k) plans and 403(b) plans.
"The goal is to lower the cost of investing," Brian Miller, senior product manager for target retirement funds, said in an interview, adding that the decision wasn't aimed at any specific plan size. As Vanguard increases its target-date fund assets, it is able to reduce the costs to plans and participants, he said.
"Given this announcement may benefit a wide range of 401(k) and 403(b) plans and their participants across the industry, it is difficult to provide an accurate estimate of the total cost savings that may be achieved," Carolyn Wegemann, a company spokeswoman, wrote in an email.
Among the 20 largest target-date providers in terms of assets, Vanguard is the clear leader, according to an annual Pensions & Investments survey published in October.
For the 12 months ended June 30, Vanguard had total target-date assets under management of $631.6 billion, up 6.6% from the year-ago period. Its target-date AUM is greater than the combined AUM of firms ranked fifth through 20th in the P&I survey.
Second-place BlackRock had target-date AUM of $255 billion, up 12.3% from the year-ago period. Third-place Fidelity Investments had target-date AUM of $253.6 billion, up 10.4%.
