Evolution vs. Invention

Defined contribution investment trends sometimes play out in not-so-obvious ways.

The defined contribution asset pool keeps growing, hitting $12.4 trillion in the first half of 2025 and representing more than 760,000 plans and approximately 89 million active participants, according to data from Brightscope, which, like PLANADVISER, is owned by ISS STOXX.

One might expect growth in assets within collective investment trusts. As the push for lower fees for participants continues, CITs are enjoying a resurgence from asset managers to DC plans. They are also getting a boost from legislators, with calls to make them available to 403(b) plans.

James Sampson, director of retirement advisory services of Hilb Group Retirement Services, says that over the past five years, he has noticed many companies pushing co-manufactured target-date funds that are invested in collective investment trusts—co-manufactured by investment companies and recordkeepers, that is.

The availability of stand-alone CIT funds has also increased, not just CIT investments within TDF offerings, according to Sampson, “especially coming down-market.” He notes that his perspective is coming from the smaller end of the market—all but one of his clients have less than $50 million in retirement plan assets, “and a fair share have under $5 million.”

Not only is there a push for CIT investments, but there seems to be a push for stable value funds to be placed into the co-manufactured TDF offerings, he adds. He says he is starting to see a comeback of institutional separate accounts.

Some of these trends show in data from the 2025 PLANADVISER DCIO Survey. This year’s survey results show 38.7% of DCIO assets are in mutual funds, down from 43.4% last year, and 30.4% are in CITs, up from 28.7% last year.

However, given the push, both from the industry and within legislation, for CITs in DC plans, there has not been the growth one would expect. According to the DCIO survey, looking back to year-end 2020, 32.1% of assets were in CITs, dropping to 30.7% as of year-end 2021—similar to year-end 2024, with no drastic swing.

In addition, the amount of DC assets in stable value funds has decreased to 2.3% at year-end 2024 from 5.6% at year-end 2020, according to the survey. DCIO assets in separate accounts grew to 30.5% in this year’s survey from 27.7% last year.

Behind the Scenes

“DCIO is not a rapidly changing marketplace,” says Viraaj Kumar, associate director and head of retirement product and strategy at ISS Market Intelligence, a division of ISS STOXX. “So even if hearing about trends—for example, we’re hearing lot of talk about retirement income and alternative investments in DC plans—the data might not show it right away.”

“To me, the million-dollar question is where to implement these things in DC plans,” he continues. “With retirement income, the barriers to adoption are still suitability, pricing and participant take-up. With retirement income—and similarly with alternative investments—providers are looking to TDFs for an embedded solution.”

That is where trends are more likely to play out—in the evolution of existing products, rather than new offerings, Kumar says.

“When you think about exposure within the DC industry, 95% of assets sit within the top 20 Morningstar categories in DC,” he adds. “For context, there’s over 100 active Morningstar categories in defined contribution, which means those other 80 categories are effectively fighting for table scraps.”

Kumar adds that when he thinks about the DC universe today, “I think about it as being a fairly fixed set of products that are tried and tested. Then within that, I see evolution, like the evolution in target-date funds. So I see the evolution being intra-product, if you will, as opposed to being a completely revamped or new asset class coming into DC.”

TDF Offering Slowdown

The 2025 PLANADVISER DCIO Survey shows that the total number of TDF offerings has decreased to 43 as of year-end 2024 from 167 as of year-end 2020.

Kumar explains that the slowing in TDF offerings stems from a combination of industry consolidation and some providers refocusing on their core expertise. Examples of consolidation are the Franklin-Putnam and Invesco-Oppenheimer deals.

“Even managers that used to offer multiple flavors of a TDF offering have now kind of refined it into a single one,” he says. “They’ve killed off flavors that weren’t attracting assets.”

Other managers have picked their battles and decided not to try to compete for TDF share: “They’ve said, ‘We’re really good intermediate core bond’ or ‘We’re really good at mid-cap growth,’ so we’re going to focus on what our area of expertise is and not do the target-date-fund game,” Kumar says.

Sampson says he has also noticed greater introductions of blend TDF offerings instead of purely active or passive: “We’re not necessarily using a lot, but there is more awareness about it.”

The DCIO Survey shows that the percentage of DC assets by style has turned in favor of passive investing, with a 12-percentage-point increase in assets in passive investments and a corresponding decrease in assets in active investments. However, this also may not reflect the whole story.

“Some would say active investing is dead within DC plans, but I would say it has a strong foothold in many categories, just not dominance,” Kumar says. “TDFs are largely geared to passive investments, but we’re still seeing some active investments in TDFs. Some asset classes are dominated by active managers—large value, large growth, intermediate core bond, mid-cap growth, for example. We see a push to passive where it’s cheaper, with no difference in alpha.”

Services for Advisers

Regarding DCIO services, Kumar says he sees a change in coverage models.

“Big providers have DC wholesaling teams and can provide due diligence and speak the DC consultant and plan sponsor language,” he says. “At the lower end of the market, providers are not investing in specialists that only talk DC. They need wholesalers that can speak to every market, so they’re using a generalist model.”

The most-provided services from DCIO providers to advisers are due diligence meetings (87.5%), investment committee meetings (75%) and research (68.8%), according to the DCIO survey.

However, from Sampson’s perspective, because his firm has its own investment analyst, investment committee and due diligence meetings and investment research are not the most valued services from DCIO providers.

“Our investment analyst might use some of these services, but he does a lot of research on his own,” he says. “Where I get the most value is from value-add services and intel. For example, in the process of coordinating a participant-facing client webinar, we might ask a provider for an expert speaker.” These events can cover topics other than retirement plan investments, such as cybersecurity, and can cover all participant financial accounts, not just their retirement plan, he adds.

Sampson says that last year, his firm partnered with a provider to create a presentation on Social Security, which was very well received.

“We’ve done a lot of partnerships with providers in which experts talk to our clients or participants,” he says. “Those are the kinds of resources we are looking for.”

Other examples of intel Sampson’s firm looks for from DCIO providers are: benchmarking reports; sales support and what other advisers are doing that is successful; and what funds to go to when replacing an underperforming fund, among other things. “They’re kind of the word on the street,” he says.

Sampson says advisers can expect good relationships built on trust from DCIO providers.

“If one of their funds isn’t performing well, I can go to them and ask what is going on,” he says. “There’s a difference between sales jargon and truth, and they know if they are not up-front, and it hurts me with a client, it also hurts my relationship with them.”

—Rebecca Moore