Updated with correction
Institutionally oriented money managers are dipping their toes in the retail investment market in response to declining defined benefit plan assets as corporations wind down their plans and baby boomers take their defined contribution plan assets with them when they retire.
Alternative investment managers are leading the way when it comes to new investment funds specifically for retail investors, sources said, but traditional managers, even those that have catered to retail investors for years, are trying new ways to attract investors to diversify their client base.
"Institutional managers moving into retail investment is a strategic planning topic that's brought up in every conversation we're having with managers. It's a really big story because defined benefit plans are essentially becoming long-term wasting trusts with no growth," said Michael S. Falk, a partner at Focus Consulting Group Inc., Long Grove, Ill.
Among managers actively pursuing retail investors ranging from individual Main Street investors to ultra-high-net-worth individuals are Ariel Investments LLC, Barings LLC, BlackRock Inc., The Goldman Sachs Group Inc., Hamilton Lane Advisors Inc. and The Vanguard Group Inc.
The retail investment market is enticing for institutional money managers given its size — $23.8 trillion, or 46.2%, of the total $51.5 trillion of professionally managed assets in the U.S. in 2019, according to a report from Cerulli Associates Inc.
While the size of the U.S. institutional investment market still tops that of retail channels, the latter is gaining market share, up 5.2 percentage points in the 10 years ended Dec. 31, the report said.