Expanding defined contribution AUM last year was like shooting fish in a barrel for the largest money managers, as the top 25 firms enjoyed an aggregate gain of 21.65%, according to the latest annual survey by Pensions & Investments.
Last year's aggregate U.S. DC assets under management for these firms climbed to $7.31 trillion as of Dec. 31 vs. $6 trillion a year earlier.
The seven biggest fish in the DC sea accounted for 80% of those gains in assets under management. They were led by Vanguard Group Inc., up 29.1% from the end of 2018 to $1.52 trillion; BlackRock Inc., up 25.6% to $1.04 trillion; and Fidelity Investments, up 28.6% to $857.1 billion.
The other biggest players were Nuveen, up 3.6% to $526.2 billion; T. Rowe Price Group Inc., up 25.5% to $518.5 billion; Capital Group Cos. Inc., up 23.2% to $451.4 billion; and State Street Global Advisors, up 29.9% to $386.1 billion.
For all DC money managers, last year's U.S. AUM of $7.9 trillion was 18.1% higher than the $6.69 trillion at the end of 2018. Since Dec. 31, 2014, DC money manager assets under management have grown by 44.6%, compared to only 7.3% for U.S. defined benefit assets. Money managers and DC consultants acknowledge that a booming equity market played a big role in AUM gains. Consultants are quick to add that the managers that grew the most and are best positioned for future growth are those that offered lower fees and greater services; emphasized target-date funds; expanded the use of collective investment trusts and separate accounts; and invested in technology to make easier plan administration and participant access.
Significant AUM growth was reflected in companies that emphasized index investing but large active manager did well, too. Money managers that are also record keepers benefited from cross-selling products.
"They all have multiasset-class expertise," said Greg Ungerman, senior vice president and defined contribution practice leader for Callan LLC, San Francisco, who, like other consultants interviewed, declined to comment on specific companies. "They have size and scale across different asset categories."
Although index-based managers have flourished in rising markets, active managers can do well "if you have strong management in asset categories for proprietary products," he said. The bigger active managers "have done that."
The large money managers "have done a good job in communicating to sponsors and participants" about the value of their target-date funds," Mr. Ungerman added. As a result, "we don't see that much change" when a client issues an RFP for a target-date provider.