Investing March 8, 2017

Vanguard's TDF Market Share Rose to 34% in 2016

The investment firm took in more TDF assets than any other company: $96 billion.
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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.”

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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%).

Participants March 8, 2017

Despite High Costs, HSAs See Increase in Enrollment

More than 40% of those who own HSAs plan to use the funds for future medical costs.
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A recent survey by ConnectYourCare found that Health Savings Accounts (HSA)s are seeing a spike in consumer enrollment, citing hopes that it will assist any future medical costs as a reason for the surge.

The “Consumer-Driven Health Plan Enrollment & Usage Trends Survey” reported that more than 40% of those enrolled in an HSAs plan to use it as a savings mechanism for impending medical needs. Twenty-one percent of survey respondents selected “tax savings” as their reason, and only 9.5% chose “lower premiums” given by High-Deductible Health Plans (HDHPs), according to the survey. Furthermore, the survey reported than when asked what the primary retirement-related concern was, 63% of respondents elected health care payments, including insurance premiums and prescriptions.

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Respondents also noted that additional IRS requirements with Flexible Savings Accounts (FSA)s is a reason as to why most participants will lean more towards HSAs, even though both hold similar benefits. When asked, almost half of respondents stated that lessening the amount of required documentation to submit would be the top change they would like to see, according to the survey.

In addition to surveying over 14,000 workers, ConnectYourCare also conducted an employer survey with nearly 250 managers. Survey questions included rating the importance of factors when weighing health accounts, with 85% of employer respondents ranking “employee customer service” as very important, 81% choosing “overall employee experience,” and 66% selecting the price of benefits solution.

The ConnectYourCare survey also found that employees continue to lack awareness regarding financial tax benefits, with 47% stating their employees rejected enrolling in tax-advantaged accounts—including HSAs and FSAs—due to unfamiliarity with these benefits.

“The results from our survey indicate that while progress is being made – and consumers are beginning to take advantage of tax-favored benefit accounts – many are still simply unaware of all the benefits offered through these products,” said Barbara Boudreau, Vice President of Strategy at ConnectYourCare.

More on the survey can be found here. 

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