Data & Research May 19, 2011

FRC Predicts $2T in IRA Rollovers in Coming Years

The Financial Research Corporation (FRC) estimates that over the next five years, assets in defined contribution (DC) plans and IRAs will grow from $9.0 trillion in 2010 to $13.3 trillion in 2015.
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While regular monthly contributions and market appreciation are key drivers of the expected DC plan growth, FRC says IRA rollovers have historically been the major source of contributions for IRAs. In a new report, “The Rollover Decision: Successful Strategies for Retaining Retirement Assets,” FRC states that rollovers will continue to be the major driver of cash flows, predicting record IRA rollover contributions of nearly $2 trillion from 2011 to 2015.  

The report discusses rollover opportunities and best practices for asset managers that offer both recordkeeping and IRA platforms to retain assets when a participant decides to rollover the assets to an IRA. FRC believes that the largest area of opportunity is the trend toward open architecture in target-date and target-risk funds.  

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FRC found that a majority of managers surveyed agreed that open architecture in DC plans provides substantial opportunity to garner and retain assets, as well as capture investor mind share. Target-date funds are the most popular qualified default investment alternative (QDIA), with most assets in the proprietary funds of asset managers offering recordkeeping, the report says. Open architecture gives the opportunity for asset managers to pry market share away from these proprietary offerings, the report concludes.  

Products May 19, 2011

Northern Trust Launches Emerging Manager Funds

Northern Trust has launched two emerging manager collective funds for institutional investors.
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The Emerging Manager U.S. Equity Funds are designed to provide access to smaller, undiscovered investment boutiques with a primary objective of generating excess returns for corporate and public pension plan investors, according to the company.  

Northern Trust’s emerging manager funds are daily valued collective funds open to ERISA-qualified corporate and public employee pension plan investors. The Northern Trust Company of Connecticut (NTCC) serves as the trustee, selects sub-managers and monitors the investments of each sub-manager in the two funds.   

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The NTCC Emerging Manager U.S. Equity Non-lending Fund is benchmarked to the Russell 3000 Index of U.S stocks, and the NTCC Emerging Manager Large Cap Non-lending Fund is benchmarked to the Russell 1000 Index of large-cap U.S. stocks.   

The funds currently utilize 11 sub-managers in a multi-manager structure.  

The announcement said the emerging manager funds may be used as a core holding within a diversified actively managed asset allocation framework or as a satellite allocation complementing a predominantly passive investment approach.  

More information is at http://www.northerntrust.com.

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