Plan sponsors are re-evaluating their investment lineups over the next 12 months, according to the DC Investment Manager Brandscape report by Cogent Research.
Cogent presented findings from the report Tuesday in a webinar. The survey was conducted online in March and April among 600 401(k) plan sponsors.
Among the “intriguing” findings, according to Linda York, vice president of the syndicated division at Cogent and lead author of the report, is the change expected for next year. “We found that plan sponsors anticipate considerable activity in terms of DC investment changes in the coming year,” she said. More than half said they were making changes in the next 12 months, “a substantial increase compared to just one year ago.”
Furthermore, 10% of plan sponsors said re-evaluating their investment menu was their top priority for the next 12 months, and more than a third said it was in their top three priorities. “Notably, 45% also cited concerns over reducing plan costs as a key priority,” York said.
“With all this attention being paid to plan investments and increased activity anticipated in terms of changes, it’s really critical for asset managers to match the right product and investment objective to each segment’s needs,” York said.
From a product perspective, “mutual funds are clearly the product of choice among DC plan sponsors, and most of the anticipated activity will occur in this product category.” Thirteen percent of sponsors said they would add traditional mutual funds to their lineup over the next 12 months, and 9% said they would add indexed mutual funds. “Passive funds actually rival active funds in terms of their future growth potential,” York noted.
Nearly 40% of plan sponsors said helping their plan participants reach their retirement goals was a priority, the report found. “It follows that products design to provide retirement income are on the radar screen for many,” York said. Over a quarter of respondents already offer such products, and 35% are interested in exploring options.