Vanguard grew assets in its target-date funds (TDFs) and collective investment trusts (CITs) by $96 billion in 2016, according to Sway Research’s report, “The State of the Target-Date Market: 2017.” Assets in Vanguard’s target-date portfolios reached $449.8 billion at the end of 2016, a whopping 27% increase from the year before, to give Vanguard a 34% share of the $1.3 trillion target-date market.
For all investment managers, assets in target-date portfolios expanded by 20% last year, from $1.11 trillion at the end of 2015 to $1.33 by year-end 2016. CIT target-date assets grew by 29%, from $355 billion to $458 billion, while TDF mutual fund assets grew by only half as much, 16%, from $760 billion to $878 billion.
Sway Research believes that Vanguard’s TDF products benefited from a growing demand for passively managed products. Assets in passively managed target-date portfolios, at $653 billion, now outpace actively managed target-date portfolios, which now stand at $594 billion; hybrid target-date products can claim $89 billion in assets.
“Vanguard was not the only fund company to expand its target-date asset base by $10 billion or more in 2016,” Sway says. “T. Rowe Price increased target-date assets by $24 billion in 2016—the most of any firm with a focus on actively managed target-dates. T. Rowe was followed by Black Rock, which added $16 billion of target-date assets.”
In terms of the largest growth by percentage, American Funds’ target-date portfolios took first prize, expanding by 40%, or $14 billion. As noted above, Vanguard’s assets in these products grew by 27%. The third-biggest growth in terms of percentage was BlackRock (18%), T. Rowe Price (15%) and Fidelity Investments (8%).