"Are things getting harder and should there be outsourcing? Should plan sponsors have an outlet?" she asked. "Yes. When we look at our business and our clients, we need to be prepared to do more for our clients. Be prepared to take on more," Loughlin said.

So what is investment outsourcing? It is when an institution delegates 100 percent of its assets and some level of investment discretion to a third party for a portfolio-based fee, according to Casey Quirk.

"Investment outsourcing is definitely growing. It's been growing steadily for quite some time," White said.

The assets are driven predominantly by corporate pension plans and all types of nonprofits.

More pensions and nonprofits are drawn to this option because it is a "more complex investing environment and a more volatile investment world, and they need more help than they are getting in the current investment model," White said.

In the corporate world, as pension funding ratios have improved and the idea of getting a plan off the balance sheet starts to take shape, more companies are willing to take that next step toward an outsourcing model, he said.

On the nonprofit side, alternative investments like hedge funds and private equity can be confusing and many of these organizations don't have the staff in house to handle them. They also are turning to outsourcing to help them manage these investment options.

It is easier for foundations and endowments to outsource all or some of their fiduciary responsibility because they manage all of the assets in one big pot. It is much harder to do in a defined contribution plan environment, Loughlin said.

In its 2008 survey of investment managers, Casey Quirk pointed out that the U.S. Pension Protection Act has helped make target date retirement funds the default option of choice within the U.S. defined contribution market. As a managed product, they do take the investment menu decisions away from the plan sponsor and put them in the hands of specialists. TDFs accounted for $228 billion in assets as of March 2008.

"Although dominated by proprietary products managed by the large plan recordkeepers, we expect competition and open architecture to creep into this market," the survey found.

The world's largest defined contribution markets are either dominated by or experiencing substantial growth for investments outsourcing, Casey Quirk found. It highlighted that diversified manager-of-manager products are where the majority of assets reside in the Australian superannuation system, which comprised $760 billion in June 2008.

The global retail manager-of-managers market also has seen growth around the world. In the past 16 years, many of the world's mutual funds have hired multiple sub-advisors, either in a bid to diversify risk or as a part of building more sophisticated asset allocation products, the report found. This market held about $440 billion in 2006, according to Cerulli Associates.

NEPC historically has offered industry a comprehensive retainer relationship.

"We've always wanted a comprehensive suite of services for our clients. The only question is which one it should be, discretion or a traditional consulting relationship," Loughlin said.

As recently as 2 years ago, NEPC's clients never asked if the firm could handle discretionary services for them, she said. Now, in every request for proposals the company is asked to submit, clients ask for quotes for more traditional consulting services and for discretionary services. A quarter of NEPC's clients ask them to quote both ways.

The challenge in the defined contribution plan arena is that discretion costs more and that industry is becoming more fee conscious because of fee disclosure regulations that went into effect in 2013.

"With pension and foundations it is their money. They feel they can make that decision. One of the reasons people think discretion won't take off in defined contribution is there is a lot of sensitivity for fees in the defined contribution arena," she said. "It remains to be seen what people want to get off their plates and who pays them and how they pay."

Historically, legal, audit and consulting fees were paid by the company. Recordkeeping and investment management fees were passed on to participants.

Fees charged to handle investment outsourcing can be so high it is cost-prohibitive for 401(k) plans to take advantage of that, Loughlin said.

Discretion can take many forms. Plan sponsors can outsource their plan design or investment decisions, but unlike Australia where plan sponsors purchase plans that are already set up, in the U.S., plan sponsors need to set up their own plans and they have fiduciary responsibility to their employees to do the best job for them.

"If a plan sponsor wanted to have someone take discretion over their defined contribution plan years ago, or even a handful of years ago, there wouldn't have been anywhere to put it, unless it was put into a structured relationship with Goldman Sachs," she said. "It was not an offering at any of the major consulting firms."

Loughlin added that her company isn't sure this service will gain traction but "we've always had a comprehensive suite of services for our clients so we want to have it. If they need it, we'll have it."

Defined contribution plans are a company benefit, but increasingly they are a very challenging benefit to operate. DC plans have become the primary source of retirement income for most Americans and because of that, the industry is highly regulated and litigated.

"Maybe plan sponsors don't want to control that as much as they have," Loughlin said.

The investment outsourcing industry has gotten a lot more competitive, with at least 100 firms doing it now, White said. This wasn't the case two or three years ago, he said. "As all industries mature they see new entrants and see pressure on fees and heightened competition starting to pick up. We're at that point. There's an awful lot of firms chasing the business today."

He believes the industry has reached its peak. "We're starting to see some firms pulling out now. I think we'll see a lot more companies leave than enter over the next three to five years. Just because the dollars and flows are meaningful here, there is still way more supply than demand to stay in the marketplace."

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