Shrugging off the coronavirus' damage to the economy and stock market, asset managers serving the defined contribution industry posted AUM gains for their mutual funds and target-date series for the 12 months ended June 30, an annual survey by Pensions & Investments reveals.
Total proprietary mutual fund assets under management rose 2.2% to $3.26 trillion vs. the year-ago period. Over five years, mutual fund AUM grew by 31.5%.
Total target-date AUM climbed to $1.91 trillion for the 12 months ended June 30, up 12.5% for the year-ago period and double the AUM from five years ago.
These gains were achieved essentially, in poker parlance, due to sponsors' playing a pat hand with their investment lineups and plan designs due to the coronavirus.
"Prior to the market decline as a result of the pandemic it was largely business as usual for many committees," said Ryan Gardner, the Windsor, Conn.-based managing partner and senior consultant for DiMeo Schneider & Associates LLC. "As the market decline unfolded and into the summer months, many committees elected to defer non-critical changes and/or other changes to their investment menus. I suspect we will start to see normal levels of activity as we get closer to year end and into the new year."
The coronavirus "has absorbed benefits staff with the CARES Act," Martha Tejera, project leader of the DC consulting firm Tejera & Associates LLC, Seattle, wrote in an email, referring to the Coronavirus Aid, Relief and Economic Security Act.
"Investment committees have had to deal with increased market volatility and shifts between investment strategies," she wrote. "Senior management has had to address other workforce issues that arose with COVID. So there has been limited capacity by plan sponsors to do anything creative or innovative during 2020."
Ms. Tejera added that she hoped that the impact caused by the coronavirus "will ease in 2021 and we will see progress with helping workers be financially prepared for retirement."
The DC asset management industry's performance for the 12 months ended June 30 benefited in general from a paucity of participant panic.
"Even though there have been wild swings on Wall Street in 2020, most 401(k) participants have stayed the course with their retirement savings behaviors," Robert Austin, the Charlotte, N.C.-based director of research for Alight Solutions, wrote in an email.
"The average participation rate in plans slipped only marginally from 81% in 2019 to 80% in the second quarter of 2020," he wrote. "Average savings rates increased slightly from 8.1% to 8.2%, likely due to the impact of automatic contribution escalation."
Although there was "brisk" net trading activity during the first quarter of 2020, "it has been more measured" during the second and third quarters, Mr. Austin wrote.
"The overall net trading activity through September 2020 was 2.85% of starting balances," he added. "In 2019, it was 2.29%. If the trend continues, 2020 will be the year with the highest trading activity since 2008. Trades have almost universally been out of equities and into fixed income funds."