Casey Quirk: New Battle Lines Forming in TDF
Arena
November 2, 2009 (PLANSPONSOR.com) - A new report
predicts that rapid growth will restructure the asset
allocation and packaging of target-date products, and that
target-date and target-risk retirement vehicles will attract
80% of new and reallocated flows into defined contribution
schemes for the next decade.
In fact, Casey Quirk & Associates predicts in a new
research report titled "Target-Date Retirement Funds:
the New Defined Contribution Battleground" that
target-date funds alone will swell to $2.6 trillion of
assets in 2018 (a point at which the report suggests the
vehicles will represent nearly half the assets in defined
contribution plans) from $311 billion in 2008 - an estimate
that the paper describes as "conservative" in that they
do not fully account for a number of additional
catalysts, such as the introduction of automatic-enrollment
IRAs and new regulations that could "further turbocharge
target-date growth," according to the report.
While nearly 90% of the 400 plan sponsors surveyed as
part of the study said they were satisfied with their
target-date options, at least to some degree, nearly
two-thirds said they would consider changes - a combination
that the report's authors say suggests that, while plan
sponsors believe in the idea of target-date funds, they
"now seek to improve its execution."
Principal Concerns
Three principal concerns are driving many plan sponsors
to consider changes to their target-date arrays, according
to the report:
"Learning lessons from the financial crisis, many plan
sponsors will seek cheaper or more innovative target-date
options for their participants," the research paper notes.
"That shift—and the unbundling it may unleash—will favor
target-date vehicles that look notably different from the
products available today."