Research

DATA & RESEARCH | PLANADVISER June 2015

2015 DCIO Survey

Each year since this survey’s inception in 2012, investment managers have reported increased asset levels in their Defined Contribution Investment Only (DCIO) businesses. Although the names of the firms participating in the survey have changed somewhat, we can report that the 37 managers on this year’s list enjoyed a nearly $230 billion (8%) increase in DCIO assets from year-end 2013 to year-end 2014, and a $63 billion (2%) increase in just the three months between 12/31/2014 and 3/31/2015.

By Alison Cooke Mintzer See Archive >
2015 DCIO Survey
Art by Katherine Streeter

Despite these impressive gains, DCIO fund allocations have remained constant in the past 12 months: 54% in stock, 18% in bonds, 17% in asset allocation funds, 9% in stable value, and 2% in money market funds. Despite much industry hype, exchange-traded funds (ETFs) are still nowhere to be found in DCIO fund allocations. However, although there was little to no year-over-year change in the percentages of assets allocated by investment type, there is a marked shift away from equities and into fixed income compared to two years ago, when 60% of DCIO assets were in stocks, 16.4% in bonds, and 4.6% in stable value investments (money market and asset allocation remained the same).

DCIO assets by vehicle are also essentially unchanged over the one year period, though again when comparing the beginning of 2015 to the beginning of 2013, there are some notable differences. As of March 31, 2015, DCIO managers report that 65% of DCIO assets are invested in mutual funds (compared to 70.5% in March 2013), 18% in collective investment trusts (13% in 2013), and 17% in separate accounts (16.4% in 2013).

The largest DCIO fund in the survey this year is BlackRock’s LifePath Target Date Fund, reporting $126.9 billion in assets as of first quarter 2015, a $17.4 billion (15.9%) increase over the prior year. BlackRock’s top DCIO fund is overseen by a team of three portfolio managers: Leslie Gambon, Alan Mason, and Amy Whitelaw. Second on this year’s fund list is also a target-date vehicle, T. Rowe Price’s Retirement Date Fund, managed by Jerome Clark since 2002. Now with $84.8 billion, the fund enjoyed an eye-popping $28.1 billion (49.6%) increase from last year.

Survey managers indicate having selling agreements with an average of 76 recordkeeping platforms, and Capital Group’s American Funds tops the list with a reported 259 platforms with which they it hashave selling agreements. DCIO managers also indicated that they have an average of 78 recordkeeping platforms on which their assets actually reside.

While recordkeeper relationships are clearly important for DCIO managers, financial advisers are critical to DCIO firms’ success in selling into defined contribution plans. Not only do advisers often guide plan investment committees in selecting the investment options for plan menus, they can also be instrumental in choosing the default investment for automatically enrolled plan participants, and these default investments tend to gather assets relatively quickly. 

One way, in theory, for DCIO managers to keep advisers happy is to offer “value- added” services. Although due diligence meetings still tops the list of these services (84% of managers provide this), a higher percentage of managers now offer training to advisers for selling and servicing defined contribution plans: more than three-quarters of DCIO firms now claim to offer this service, versus two-thirds of managers last year. Now about half offer 401(k) lead generation to advisers, and more than 20% give compliance support and access to retirement industry-specific legal counsel. On the other hand, some areas of service to advisers are not growing as much. Conferences for advisers and research are both down this year: offered by 68% (down from 78%) and 65% (down from 75%) of managers respectively.  

Methodology

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PLANADVISER’s fourth annual survey of Defined Contribution Investment Only (“DCIO”) providers was conducted in April and May 2015 via an online questionnaire. Approximately 143 investment firms known or suspected to market to defined contribution plans received the questionnaire, and the 37 organizations listed in this survey represent those that agreed to complete the questionnaire in its entirety. This survey is for reference only and is not comprehensive of the entire DCIO industry, as some major providers chose not to participate. For more information, or to participate in future surveys, please email surveys@planadviser.com