There’s lots of talk about the growth of assets in ETFs outpacing that of other financial products. While that storyline is mostly true, ETFs have low penetration in the multi-trillion retirement plan marketplace, where they’re a virtual no-show.
Earlier this month, Blackrock’s iShares unit said it would close 18 ETFs in mid-October.
Most of these funds had made little traction with investors, judging from their lack of assets.
But here’s where things get really interesting: Of the ETFs being closed, nine iShares are target date or retirement-geared funds which have target dates from 2010 to 2050.
Did Blackrock’s iShares just bail on the 401(k) market? Love them or hate them, target-date retirement funds have been immensely popular within the 401(k) market.
A key reason for this is their designation as “qualified default investment alternatives” by the Department of Labor (DOL). Coupled with automatic enrollment into retirement plans, this situation has been a boon for these types of retirement funds.
The DOL estimates that investors should contribute between $70 billion and $134 billion in additional retirement savings by 2034.