Target-date funds continue their march through the investment lineups of defined contribution plans, snapping up assets and raising allocation percentages in Pac-Man-like fashion.
Target-date funds offered by corporate sponsors grabbed 25.3% of the total asset allocations among 10 broad categories for the 12 months ended Sept. 30, 2019, up from 19.9% the year before, according to Pensions & Investments' annual survey of the largest retirement plans. Among public DC sponsors, the asset allocation percentage was flat at 21.6%.
The public and private company data reflects the DC components of the 200 largest U.S. retirement plans tracked by P&I.
Among these plans, aggregate off-the-shelf target-date fund assets committed to defined contribution rose 45.5% to $64.6 billion in the latest survey vs. $44.4 billion in the previous survey. Over five years, these assets grew by 139%.
In addition, custom target-date funds in DC plans advanced 19.5% to $238.7 billion in the current survey vs. $199.7 billion in the previous survey. Over five years, the custom assets advanced by 117.4%.
Target-date fund assets in DC plans grew faster than aggregate DC assets.
For the 200 largest retirement plans, the total DC component rose 4.6% to $2.58 trillion vs. $2.47 trillion in the previous survey. Over five years, total DC assets rose 44.4%.
The gains were similar for the DC component of the 1,000 largest retirement plans: up 4% to $4.26 trillion vs. the previous survey and up 41% over five years.
If a rising DC tide lifted all boats, target-date funds occupied the second-biggest boat for both corporate DC and public DC plans.
For DC assets in the 200 largest corporate retirement plans, domestic equity — excluding company stock — had the largest presence with 32% of assets vs. 34.6% in the previous survey. Company stock contributed 10.2% vs. 12.7%.
For public plans, domestic equity dominated with a 40.9% allocation vs 43% for the previous survey.