TDF Mutual Funds and CITs Dominated by Proprietary Holdings

Sway Research’s first in-depth study of the target-date fund (TDF) space based on detailed analysis of more than 120 mutual fund and collective investment trust (CIT)-based target-date series finds these funds had nearly $1.1 trillion in assets at the end of 2015.

Nearly 90% of the assets in target-date mutual funds and CITs are controlled by products that invest only in the proprietary funds of the series sponsor. The research also found more than four in five TDF dollars are invested in a series that features a “through” retirement glide path, though the term “through” is very much subjective, as more than half of these assets are in products that realize their equity landing point (the point at which they reach their lowest equity allocation) within 15 years of reaching the target date.

Although there is a wide range of options for tactical glide path deviation, almost all of the assets are held in products with a range of 10% or less.

The study reveals that as of the end of 2015, more than three of every five dollars invested in a target-date mutual fund or CIT is controlled by one of only three financial services firms—Vanguard, Fidelity, and T. Rowe Price. Not coincidentally, each of these firms also possesses a defined contribution (DC) recordkeeping business. Vanguard is the most dominant TDF player, managing nearly one-third of the $1.1 trillion of TDF assets within its proprietary offerings.

Only a handful of asset managers that lack a DC recordkeeping business or branded product have achieved a substantial share of TDF assets. BlackRock is the only firm among the top-10 in market share that does not have a DC product or platform.

The report lays out the competitive landscape and opportunities within the TDF space, while also providing insights into the product design features that have generated the most market share. Information about how to order the report is at http://www.swayresearch.com/research/.