The data shows a spread of nearly 11.5 percent between the best- and worst-performing non-managed accounts.

But managed accounts experienced substantially less volatility in their performance—only about a 4 percent spread between the best and worst performing accounts.

Empower’s study, which was conducted with its subsidiary RIA, Advised Assets Group, suggests the difference in both the extra returns seen in managed accounts, and the wide variance in returns with non-managed accounts, is largely explained by behavioral finance.

Ed Murphy, president of Empower, says managed accounts can neutralize participants’ natural instinct for loss aversion, which can influence the stasis so often experienced in non-managed accounts.

That fear can keep savers in a poorly balanced strategy.

“Managed accounts can take the emotion out of investing,” said Murphy in an interview. “More and more, participants are showing they want help designing and managing a strategy. A managed approach can give participants the confidence they need that investments in their plan are properly allocated.”

Murphy said Empower is seeing growth in terms of the number of plans adopting a managed option and the number of participants actually enrolling in them. Because of their relative novelty in the market, previous comparisons have been hampered by limited data.

But this year’s study incorporated data from 64 percent more plans and 159 percent more participants than last year’s study, as more savers have been enrolled in managed accounts long enough to be eligible for review.

That suggests a more accurate accounting of how well managed accounts are faring, said Murphy.

“The results are convincing,” he added. “Look at the compounding effect of an annual difference in 200 basis points. Over a participant’s lifetime, it can mean an astronomical increase in retirement savings.”

Fees are important, underscored Murphy, because he thinks an excessive preoccupation with cost can have the adverse affect of participants overlooking the need to understand their risk profile. That can result in volatile, and often lack-luster, returns.

Earlier this year, Cogent Reports, the financial services research arm of Market Strategies International, released research showing one-fifth of plans with at least $500 million in assets are defaulting participants into managed accounts.

That’s a notable increase from just last year, when only 5 percent of such plans were doing so.

As adoption has grown, and as more record keepers and advisors create managed products for the market, some have suggested they are poised to replace target-date funds as the next evolution in plan design.

Murphy is skeptical of that theory, and says both options will have their place for the foreseeable future, as different investors will be attracted to different strategies.

But he does say the conventional target-date strategy is “outmoded.”

“Take two 40-year-old participants. One has saved, the other hasn’t. One has a history of cancer, the other is healthy. Both are put in the same TDF with the same glide path. There’s not enough personalization,” said Murphy.

“And there is a substantial difference in the risk different funds with the same glide path take on. I think people purchase them without a full appreciation of the risk involved,” he said.

That said, he doesn’t see target-date funds going away. He does, however, see them evolving.

Anecdotally, Murphy says interest in managed accounts is growing with all types of sponsors, but that their popularity is particularly notable among sponsors of public plans, such as state and local governments.

Still, challenges remain. Education on managed accounts, and their value proposition, remains essential.

“We believe this new paper presents a strong empirical case for considering managed accounts as part of a plan sponsor’s offering to its plan participants. We will be sharing it with both advisors and clients as a way to drive the discussion further,” he said.