When evaluating the health of external money managers, their client composition is key. There have been large shifts in the flow of retirement capital over the past 15 years, and the U.S. corporate retirement market has shifted to primarily defined contribution plans. Defined contribution assets have grown at an annualized rate of 7.8% since 2004, while managers’ defined benefit AUM have grown at a 2.2% annualized pace.
The five largest DC managers have grown an annualized 12.4% annualized on average since 2004, while the universe as a whole has grown around 7.6% annually.
For managers, defined contribution has become a winner-take-most segment of the industry. Target-date strategies are an extreme example — the top 10 managers have a 97% market share. This is critical, because target-date strategies continue to attract assets at a rapid pace.