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Study: Investment-Only DC Plan Assets to Grow to $3.5 Trillion by 2017

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The market for investment-only defined contribution plans is expected to grow to 60% of the DC plan market by 2017, according to a new report.

Strategic Insight, New York, published this finding in a summary of results from a new survey of investment-only and proprietary defined contribution plan assets. This second report of Strategic Insight’s new DC Research Suite, DC Market Sizing and Outlook 2012, provides defined contribution market sizing and forecasts by plan type, plan size, and vehicle structure, plus findings from a DCIO manager survey fielded in April 2012.

More than 30 firms participated in the survey fielded by Planadvisor (an affiliate of Strategic Insight), representing more than $1.3 trillion in investment-only assets.

Investment-only DC plan assets, the study says, will grow to $3.5 trillion by 2017, a 52% rise from the $2.3 trillion recorded at year-end 2011. The 2017 total also represents an 8% growth in market share relative to year-end 2011, when investment-only plans stood at 52% of all DC plan assets; the balance of plans comprise proprietary plans.

Investment-only assets, the study states, refer to defined contribution plan assets managed by an asset management firm. Proprietary plan refer to those run by a record-keeper or administrator.

Strategic Insight Research Analyst Bridget Bearden attributes the rise in market share to fee disclosure regulations that will “shed light upon what have often been considered ambiguous fee arrangements.”

The scrutiny of DC plan fees, the report adds, will speed the growth of “open architecture” DC plan models, notably among investment platforms that traditionally offered their own funds.

The total DC plan market—including 401(k), 403(b), 457, profit-sharing and similar plans—will grow to $5.9 trillion by 2017, the study says. This represents a 31% rise from the $4.5 trillion in assets posted at year-end 2011.

A survey conducted for the report found that mutual fund firms are responding to the DC investment-only growth opportunity. More than half of firms reported increasing commitment to DCIO by adding headcount: The median number of DCIO-focused sales people doubled to six in March 2012 from three in 2010.


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