Retail Channel Market Share Nears Parity With Institutional: Cerulli

The retail client channel’s market share surpassed that of the institutional channel in 2020 and 2021, before receding in 2022 amid a significant equity market pullback. After that dip, however, retail client channels have gained ground and are again nearing 50% market share.

“A significant drop in assets during the equity market correction of 2022 has led to retail client channel assets posting lower three- and five-year compound annual growth rate figures compared to institutional client channel assets,” Brendan Powers, Cerulli’s director of product development, said in a statement. “A higher year-over-year growth rate in 2024 highlights a return to the long-term 10-year growth rate trends that have favored retail client channels.

Cerulli expects the trends to continue, Powers said, as corporate defined benefit plans pursue pension risk transfers and corporate defined contribution plans continue to see assets roll over into IRAs.

OCIO Footprint

Asset managers evaluating addressability in either channel should continue to monitor emerging trends with key intermediaries, Cerulli said.

Outsourced chief investment officers continue to increase their footprint as intermediaries across most U.S. institutional asset owner channels. For example, an OCIO oversees 37.4% of corporate defined benefit assets, while 35% of endowment channel assets are using an OCIO’s services.

At the end of 2024, total U.S. OCIO assets amounted to $3.3 trillion, having tripled in less than a decade. New client adoption will drive future growth projections, Cerulli said, but research also found that replacement mandates are becoming part of this maturing industry.

Asset managers who distribute products through OCIOs need to be aware of these changing dynamics and monitor the potential evolution of OCIO provider relationships, Cerulli said.

RIA channels have similarly grown in importance to many asset managers’ retail distribution strategies, according to the report. The outsized asset growth of independent and hybrid channels has been fueled by advisor movement and merger-and acquisition activity, creating $5.9 trillion in professionally managed assets.

As M&A efforts, fueled by private equity and aggregators, roll on, a handful of mega-firms now control the bulk of RIA assets. In addition, as asset managers seek to offer more choice to their clients, the range of vehicle options they are making available for both retail and institutional investors continues to expand.

Managers looking to distribute to institutional investors, Powers said, will find demand typically starting with institutional separate accounts, then extending to private funds and/or mutual funds for smaller institutions or for asset classes that are operationally challenging for separate accounts.

“The [collective investment trust] vehicle is now table stakes for managers operating within the DC space,” he said.

Managers pursuing distribution in retail client channels are increasingly using exchange-traded funds and separately managed accounts, Powers said, while they also build out alternative wrapper options to make private market strategies easier for affluent investors to access.