FRC Research Helps Managers in Growing DC Market

July 24, 2007 ( - A new study from Financial Research Corporation (FRC) provides investment-only defined contribution (IODC) asset managers with advice and information on the growing market.

According to an FRC press release, in 2004, FRC projected investment-only DC assets would surpass proprietary assets by 2010; however, its new study findings indicate IODC assets will surpass proprietary assets before the end of 2008. IODC assets are projected to grow at a 9.3% compound annual growth rate over the next five years while proprietary investments are projected to grow at a more modest 5.5% compound annual growth rate, the release said.

One force contributing to the growth of IODC assets has been a growth in 401(k) contributions. FRC estimates that total 401(k) contributions reached $234 billion in 2006 and will rise to $307 billion by 2011. In its study, FRC examines the impact auto enrollment will have on contributions and delivers auto-enrollment models and projections for 2011.

In response to the growing DC marketplace and competition, asset managers need to make major changes to their organizations’ staffing and support services, FRC said. In its study, FRC offers eight options for improving business, as well as advice for managers on product development, structures, and strategies.

Investment managers pursuing the IODC market have two important decisions to make concerning the distribution of their products: selecting the platforms on which they would like to offer their products and prioritizing the platforms on which they will focus significant time, effort, and resources.

The research report, “IODC Growth Opportunities: Capitalizing on Changes in a Dynamic Market”, was derived from a primary research survey conducted February through April of 2007 of 15 asset managers of various fund sizes and differing experience levels representing more than one-quarter of all IODC assets. Additionally, FRC interviewed a number of asset manager and DC recordkeeper executives on their organizational structure, staffing, distribution options, product development, business threats, and opportunities.

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