Deals & People July 29, 2009

ING Keeps Leadership Intact Following McCarthy Departure

Following the recent departure of Sandy McCarthy as president of Institutional Plan Services, ING said it has further streamlined its Retirement Services structure, while ensuring the institutional businesses remain focused under their current leadership model.

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According to a press release, Wayne Finnegan will continue to lead large corporate defined contribution and Brian Haendiges will continue to lead large corporate defined benefit, both reporting to Richard Mason, head of Corporate Markets for ING US Retirement Services. Bill Jasien will continue to lead the government business, reporting to Brian Comer, head of Health, Education & Government Markets for ING US Retirement Services.

ING made the announcement as it marked the one-year anniversary of its acquisition of CitiStreet LLC in a $900 million deal that expanded ING’s footprint in the retirement industry (see “CitiStreet Sold to ING for $900 Million ”).

McCarthy was a member of the founding executive team of CitiStreet and was president and a member of the board of directors at the time of CitiStreet’s acquisition by ING. She will join Mercer as Retirement Business Leader for its U.S. outsourcing business, effective August 10 (see “McCarthy to Head Mercer’s Retirement Biz ”).

Data & Research July 29, 2009

Has Target-Date Fund Opportunity Peaked?

Now that all the hype and barrage of new offerings in the market have died down, is there still opportunity in target-date funds for asset managers?

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A new Cerulli report says opportunity still exists, but success hinges on shelf space, product design, regulation, and performance. “We view the industry as being at a crossroads. More than 70% of asset managers feel that they have just begun to tap this opportunity, while a small but growing percentage think it has reached its peak. The top three fund managers currently control nearly 80% of target date fund assets,” said Cindy Zarker, lead analyst of the “Cerulli Special Report: Target-Date Funds: Still Viable?.”

According to a Cerulli release, the report explains that asset managers face a number of challenges. Some challenges, such as performance concerns, might soon begin to abate, reflecting a short-term reaction to the market and economic crisis, while others may plague asset managers indefinitely, such as fee pressure, limited access to shelf space, and the challenge of balancing greater customization with scalability.

“We feel that asset managers will be well-served to carefully assess the true opportunity against potential risks. Firms should ask themselves if they can gain critical mass without access to a recordkeeping platform. If they examine these tough questions, some may find that this is not the market for them, and fund consolidation becomes the logical option,” Zarker said.

Cerulli notes that nearly 70% of target-date fund portfolios have less than $100 million AUM, and most asset managers consider $100 million to $150 million to be the minimum level of assets for a mutual fund to be profitable. Zarker said target-date fund consolidation is needed to keep small funds from being a drag on organizations, consuming resources from the legal department to marketing.

Despite the challenges, asset managers believe that open architecture will ultimately take in this market leading to subadvisory opportunities, which, along with product innovation, will allow for meaningful asset gathering, according to the release.

The report can be purchased at www.cerulli.com.

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