Professionally managed assets reached a total of $36.8 trillion in 2013, gaining 10.9 percent over 2012.
That’s according to new research from Cerulli Associates, which said that institutional client assets increased at approximately the same rate, at 10.6 percent, as retail assets, at 10.9 percent, in the past year. Institutional client assets actually grew over a 10-year period at a higher rate (5.5 percent) than retail assets (4.8 percent).
Cerulli also said that institutional client asset growth has been driven not just by market appreciation but also by growth in defined contribution assets. From 2009 through 2013, DC assets grew at a compound annual growth rate (CAGR), of 11 percent. In addition, the opening of newer institutional channels, such as insurance general accounts, and asset managers’ targeting of major global asset pools, also drove growth.
In institutional channels, 401(k) plans, fueled by market appreciation and the continued addition of automatic features, have grown to be the largest distribution channel, when considered by professionally managed assets; 401(k)s held $3.9 trillion in assets.
Cerulli classified defined contribution plans as opportunities, in part because 2013 saw a continued movement away from proprietary funds and those associated with plan recordkeepers. That means that plan sponsors are faced with a broader array of choices from an increasing field of providers. At the same time, plan fiduciaries are not content with the higher risk entailed in using proprietary products and may also be encouraged by an advisor or consultant to seek out nonproprietary “best of breed” funds.
Challenges and risks, said Cerulli, include boomers, who are “the greatest threat to the DC market” as they retire and choose either rollovers that take assets from plans or start to draw assets from DC accounts. This was seen in the private DC market in 2013, the research continued, with net contributions turning negative for the first time.
IRAs are also classed as challenges and risks, with the competition for rollover assets increasing, a broader field of competitors seeking to manage assets and new products being developed to catch the attention of consumers.
Within the DC market, Cerulli said, target-date funds can provide opportunities for growth despite the maturation of the market.
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