The Markets March 4, 2019

Target-Date Solutions Reach $1.77 Trillion in Assets

CIT-based solutions grew, while mutual fund-based solutions declined in 2018, according to Sway Research.

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Mutual fund and collective investment trust (CIT) target-date solutions reached $1.77 trillion in assets at the end of 2018, a modest 1.1% increase from $1.75 trillion the year before, according to Sway Research.

CIT-based solutions began the year with $638 billion and grew by 6.1% to reach $677 billion. Mutual fund-based solutions, on the other hand, declined by 1.9%, from $1.11 trillion to $1.09 trillion. Sway attributes this to the poor stock market returns in 2018 and ongoing movement among plan sponsors away from higher-cost mutual fund target-date solutions to lower-cost CITs.

Target-date series that invest in passively managed underlying funds reached 53.3% of target-date solutions, up from 51.2% in 2017 and 47.0% in 2015. Target-date series that invest in actively managed underlying funds saw their market share fall to 38.0%, down from 41.7% in 2017 and 46.1% in 2015. Hybrid target-date series that invest in both actively and passively managed funds saw their market share rise to 8.6%, up from 7.2% the year prior and 7.0% in 2015.

While some believe a down market is needed to stem the tide of assets flowing from actively managed funds to passively-managed ones, negative stock market returns in 2018 (the S&P 500 Index was down 4.4%) did not improve the attractiveness of target-date mutual fund series that invest in actively-managed underlying funds. “Active” target-date funds ended 2018 with lower asset-weighted returns than passive target-dates funds for 1-, 3-, and 5-years. This is a reversal from the end of 2017, when actively-managed target-date series finished with higher returns for the same periods. Sway says managers of actively-managed series need to outperform in down markets for their products to remain attractive when compared to lower-cost passively-managed competitors.

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Sway’s annual in-depth study of the target-date market is based on a proprietary database of mutual fund and CIT target-date portfolio and asset data, which includes 150 different target-date series spread across nearly 6,000 individual mutual fund share classes and CITs.

Visit www.swayresearch.com for more information.
Products March 4, 2019

Pentegra Announces 401(k) Offering With Only SRI, ESG Investments

Pentegra will provide recordkeeping and 3(16) fiduciary administrator services, and LeafHouse Financial will provide 3(38) discretionary investment fiduciary services for the plan.

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Pentegra is partnering with Social(k) and LeafHouse Financial to offer the Big Green Retirement Plan, an aggregate 401(k) retirement program with a focus on socially responsible investing (SRI) and environmental, social and governance (ESG) investing.

The plan offers comprehensive, bundled 401(k) plan services with full fiduciary and investment outsourcing capabilities. Pentegra will provide recordkeeping and 3(16) fiduciary administrator services. LeafHouse Financial will provide 3(38) discretionary investment fiduciary services for the plan.

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“Until now, green companies have had limited options for retirement plans that offer socially responsible investing alongside fully bundled 401(k) plan services and outsourced fiduciary responsibility,” says Pete Swisher, Pentegra senior vice president and national practice leader. “The Big Green Retirement Plan offers a tremendous market opportunity.”

LeafHouse President Todd Kading adds: “Environmental, social and governance factors are increasingly viewed as important elements in determining the financial performance of companies. Our firm sees the trajectory of ESG investing rising, and believes the time is right to offer investment oversight to retirement plans. In our opinion, there is no better way to do this than to partner with two industry leaders, Pentegra and Social(k).”

Social(k) Founder and Owner Rob Thomas says the Big Green Retirement Plan should allay sponsors’ fiduciary concerns about offering SRI and ESG investment options.

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