March 2014, BOSTON. New research from global analytics firm Cerulli Associates, predicts that target-date strategies will capture 63.4% of 401(k) contributions in 2018.
"Plan sponsors, consultants, and advisors have increased focus on target-date decisions as plan assets allocated to target-date funds have increased," comments Bing Waldert, director at Cerulli. "The leaders among target-date providers have not changed during the past three years, but below the top tier, some asset managers have demonstrated the ability to grow their target-date assets."
The first quarter issue of The Cerulli Edge-Retirement Edition analyzes the growth of the target-date industry, how risk management capabilities will be essential to growth, and the emergence of alternative qualified default investment alternatives (QDIAs).
"Existing target-date managers remaining in the market must demonstrate risk management expertise," Waldert explains. "The majority of target-date managers believe that asset allocation and risk management capability will be the primary drivers of future target-date growth over the next three years."
"Target-date managers should consider tying the assumptions underlying asset allocations to the needs of a given situation," Waldert continues.
Cerulli warns that asset managers must have a strategy in place to grow marketshare of target-date assets; otherwise they risk irrelevance in the defined contribution space.