In 2010, when total DC assets in the U.S. were about $4.4 trillion, assets in TDRFs accounted for approximately 12.5% of the total, or $550 billion. By 2020, when total DC assets are expected to reach $7.7 trillion in the U.S., TDRFs will contain approximately $3.7 trillion, or 48% of the total.
The forecast also predicts low-cost passive funds, along with innovative, customized active accounts, will be the fastest growing strategies adopted by investors, squeezing out the currently dominant mutual fund.
By 2020, assets invested in passive strategies and innovative active portfolios will capture an increasing share of the overall target-date market by 2020, approximately 74%, versus 52% in 2010, according to Casey Quirk. Some innovations Casey Quirk expects will capture market share within target-date structures this decade are tactical asset allocation, hedge fund-like strategies, mixing active and passive and proprietary and non-proprietary strategies, and retirement income.
“As target date retirement funds mature, the landscape will favor innovators providing strategies common in the defined benefit world, and low cost passive providers,” said Casey Quirk Partner, David Bauer. “There is tremendous opportunity but managers must thoroughly examine the market complexities before jumping in.”