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Cerulli Sees Plan "Investment Only" Market Growing

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Money managers still have room to increase their share of the U.S. private defined contribution retirement plan “investment only” market, a research firm says.

The total amount of assets in 401(k) plans, money purchase plans, profit-sharing plans and individual 401(k) plans could increase to $4.3 trillion in 2014, from $3.3 trillion this year, according to Cerulli Associates, Boston.

Despite the effects of the financial crisis, defined contribution plan assets have increased from $2.6 trillion in 2008, and the investment only (IO) asset total has increased to about $2 trillion, from $1.5 trillion, the firm says.

IO assets will account for 60% of plan assets by the end of the year, up from 42% in 2003, the firm predicts.

Proprietary funds have about 45% of the private defined contribution plan assets, and employer stock has a 13% share.

About 99% of all plans have less than $100 million in assets, and most of those small plans use proprietary 401(k) platforms. Due to the emphasis on proprietary platforms at the small plans, proprietary funds hold 83% of total assets at the average small plan, Cerulli says.

The analysts say the best opportunity for IO managers lies in sales of custom target-date funds built for plans with more than $100 million in assets.