with the help of double-digit returns for U.S. stock indexes, defined
contribution (DC) mutual fund assets approached the $4 trillion mark. With over
60% of these assets—excluding funds-of-funds—in the domestic equity bucket at
year end, the strong returns helped the DC market grow by 8% for the year.
Generally, allocations have remained fairly static over the last decade, though
taxable bond funds have recently eroded several percentage points away from
their equity counterparts.
last year, however, exhibited a decided shift, U.S. equity funds being hit with
outflows of $14.6 billion while U.S. taxable fixed-income funds took in $17.7
billion. In contrast, international equity funds saw inflows of $12.9 billion
against a relatively flat $91 million of outflows from global taxable
fixed-income funds. Excluding funds-of-funds, DC mutual fund net inflows
amounted to $15 billion. The addition of flows related to
funds-of-funds—largely attributed to target-date funds (TDFs)—yielded an
additional $37 billion of inflows, resulting in $52.5 billion of total DC
mutual fund inflows for the year.
the attention to TDFs, they still represent just over 5% of industrywide mutual
fund totals and 15% of DC mutual funds. Still, assets in the strategies have
increased by 43% over the last three years. Over 2016, TDFs saw $64 billion of
net inflows, whereas risk-based lifecycle funds experienced outflows of $17
billion, and non-lifecycle funds were hit with $76 billion of outflows.
flows in both lifecycle categories were muted as compared with the industry
overall; however, non-lifecycle funds experienced close to a $100 billion
differential between the industry’s outflows and DC’s inflows.
second to domestic equity in terms of retirement asset-allocation percentage,
international equity funds nevertheless managed to attract close to $13 billion
of net new flows in 2016. This momentum was led by the foreign large blend,
world allocation, diversified emerging market, and world stock categories,
while the largest international equity category, foreign large growth,
experienced outflows of $3.4 billion for the year. These five categories
combine to make up 90% of retirement mutual fund assets in international
taxable bond (global) mutual funds, the world bond category accounts for the
majority of assets in both DC and the industry overall. Funds in this category
experienced 2016 net outflows of $100 million in DC and $8.3 billion across the
broader industry, though they were offset with positive flows into emerging