Growth in target-date funds is expected to increase 21% between the end of 2011 and 2016, a study conducted by BrightScope with Fuse Research Network, an asset management research and consulting firm, found. Market share in defined contribution plans should increase from 76% in 2011 to 80% in 2016.
BrightScope on Wednesday launched a series of research reports examining the defined contribution market. The first, “DC Product Usage Trends: Target Portfolio Assets,” covers target-date and target-risk portfolios.
It’s true that both target-date and target-risk funds suffered during the recession, but the report noted that losses then have been made up for by now; assets in target portfolios recovered their pre-crisis levels in 2010. Now, target-date and target-risk funds have a combined $470 billion in defined contribution assets, BrightScope found.
BrightScope noted that target-date portfolios take a larger share than target-risk portfolios, at 70% of defined contribution assets. Target-date portfolios also boast a much higher average balance than target-risk portfolios: $12 million compared with $2 million.
Target portfolios’ popularity were already on the rise during the early part of the century, but the Pension Protection Act in 2006, which encouraged their use as default investment options, spurred their growth, the report found. In 2007, the year after PPA was passed, target-date assets increased from 50% of the defined contribution market to 65% in 2009.