Passively managed index funds account for the largest share of collective trust funds in defined contribution plans by far, new research concludes.
Cerulli Associates released this finding in a third-quarter, 2013 report, “The Cerulli Edge: Institutional Edition,” which explores trends respecting collective trust funds (CTFs) and, separately, hedge fund investing.
The report pegs indexed funds at 66 percent of CTF assets in DC Plans. Actively managed funds (excluding stable value funds) garner an additional 23 percent. Stable value funds account for another 10 percent of CTF assets, the balance (one percent), going to a mix of other funds.
“Indexed collective trust fund assets dominate the CTF profile in defined contribution plans as the retiring population seeks capital preservation,” the report states. “Although stable value strategies are designed to maintain capital, given their low yields, they are losing support.
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“The inherently low fees of CTFs piggy-backed on a passive strategy are a win-win for the scarred Baby Boomer who is repeatedly bombarded by daily examples of management fees eating into absolute returns,” the report adds. “Fortunately for asset managers, CTFs have yet to penetrate the mainstream investor’s vernacular, leaving plenty of room to increase educational awareness of the benefits of wrapping a strategy in a CTF.”