When it comes to outfitting their 401(k) plan menus, sponsors suffer no shortage of options.
According to Judy Diamond Associates' recently developed Compass plan analytics tool, a premium add-on module that subscribers to JDA's Retirement Plan Prospector can access, plan advisors and sponsors can select from a universe of more than 650 fund families with more than 7,000 fund options. JDA is a business unit of ALM Media, BenefitsPro's parent company.
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Eric Ryles, JDA's managing director, says the Compass tool was designed with asset managers in mind, and allows them to track the penetration of their products, and their competitions', with 401(k) plan sponsors.
The tool gleans data from 50,000 of the largest 401(k) plans representing 60 million plan participants, or 70 percent of all defined contribution participants, and 70 percent of all defined contribution assets, or nearly $2 trillion of retirement assets.
With the tool, asset managers can track exactly how many sponsors use their funds, total assets captured by each fund, the three-year growth or decline in use of the funds, and the percentage of a plan's assets captured by a specific fund.
The JDA team designed an algorithm to streamline "dirty" fund data from Form 5500 filings with data from the Securities and Exchange Commission and Google. The upshot is a cleaner assessment of specific fund market share, according to an explanation by Ryles.
4 familiar fund families top the Compass list
Four familiar fund families dominate the roughly $1.9 trillion in assets tracked by the Compass tool.
Vanguard funds top the list, with nearly $490 billion in total DC plan assets. Fidelity Investments is second, with more than $316 billion in assets, T.Rowe Price third with almost $143 billion in total assets, and American Funds fourth with about $104 billion.
Together, those four fund families account for more than $1 trillion in total plan assets, or more than half of the funds tracked by the tool.
Across the tool's 50,000 plan universe, Fidelity funds are used the most by plans, as they show up more than 176,000 times—the tool tracks the occurrence of each fund within a fund family's lineup.
While still the most common, penetration of Fidelity's funds has dropped since 2012. Vanguard, whose funds showed up more than 155,000 times, saw its fund utilization increase by more than 34,000 instances between 2012 and 2014.
Some smaller families saw their penetration increase substantially between 2012 and 2014.
For instance, Dimensional Fund Advisors, whose funds manage roughly $11.7 billion in assets, putting DFA well outside the top ten families by total assets, realized a 43 percent increase in the occasions its funds were used in DC plans. DFA funds show up about 15,500 times across the plans tracked by Compass.
Legg Mason funds saw an even larger increase by percentage. In 2014, the funds, which manage about $4.1 billion in assets, were adopted 5,346 times, according to Compass, up from about 3,200 occasions in 2012, or a roughly 67 percent increase.
JP Morgan funds, the 8th largest fund family by assets with about $55.5 billion in assets under management, were utilized on almost 36,000 occasions, realizing a more than 50 percent increase from 2012.
Compass also tracks the penetration of target-date funds. Vanguard's 2035 Fund and 2025 Fund ranked 7th and 10th, respectively, among the top ten funds by assets.
Of the top 100 most popular funds, 28 are TDFs, which hold $272 billion in plan assets, or 35 percent of $774 billion in the top 100 funds.
While TDF penetration has held steady since 2012, the funds are capturing a greater percentage of wallet, or total assets in plans, which nearly doubled from 2012 to 2014, moving from 19 percent of plan assets captured to 35 percent.
Fidelity has 10 TDFs in the top 100 funds, Vanguard nine, T.Rowe Price seven, and JP Morgan two.
Here is a list of the Top 10 funds, by assets, as determined by the new Compass tool and provided by JDA.
10. Vanguard Target Retirement 2025 Fund
With nearly $22 billion in assets under management in the plans tracked by Compass, the fund is designed for pre-retirees with about 10 years to retirement. Like its 2025 version, all assets are spread across four passively managed Vanguard funds. Its equity allocation is 65 percent.
9. Dodge & Cox International Stock Fund
At $22 billion in assets, the fund is one of six offered by Dodge & Cox. According to the firm's website, the fund invests in non-U.S. companies, including those in emerging markets. Its 10-year return has been about 2.9 percent. The fund is currently closed to new investors.
8. Fidelity Spartan 500 Index Fund (Fidelity 500 Index Fund-Investor Class)
At $23.2 billion, the Spartan 500 Index Fund, which Fidelity recently renamed the Fidelity 500 Index Fund-Investor Class, is proof the long-time leader in active management is also looking to compete in the passive space.
Offered at an expense ratio of nine basis points, about 80 percent of the fund in invested in stocks. Among its top holdings are Apple, Exxon Mobile, Facebook, and Berkshire Hathaway. The fund's top ten holdings account for about 18 percent of total assets.
7. Vanguard Target Retirement 2035 Fund
The largest target-date fund of the funds tracked by Compass has $23.3 billion, and is designed for participants between the ages of 44 and 48, with roughly 20 more years to invest until retirement.
More than 80 percent of the fund is allocated to stocks—the rest is in bonds. All assets are spread across four proprietary Vanguard passive funds. Introduced in 2003, its 10-year average return is 5.7 percent.
6. Dodge & Cox Stock Fund
As a fund family, Dodge & Cox also ranks sixth in total assets with $57.2 billion under management. Its Stock Fund supplies most of the fund family's ballast, as it alone holds almost $25 billion, accounting for about 43 percent of total fund family assets.
5. Vanguard Total Bond Market Index Fund
At more than $26 billion in assets, the passively managed fund is the only pure fixed-income vehicle that made Compass' top 10 fund list.
4. Fidelity Contra Fund
About $30.1 billion in assets tracked by Compass are held in Fidelity's actively managed Contra Fund, which has experienced pressure from outflows, along with most of the actively managed fund universe. For the three years ending on August 21st, investors added almost $1.3 trillion to passively managed mutual funds, while moving more than $2.5 billion from active funds, according to Morningstar.
3. American Funds EuroPacific Growth Fund
Proving the appetite for global diversification among larger plans, the EuroPacific fund holds $32.2 billion in assets, or almost one-third of total assets throughout the American Fund family.
2. PIMCO Total Return Fund
The flagship PIMCO fund remains prominent in DC plans, with $46.7 billion in assets under management, despite the fact that utilization of all PIMCOs funds dropped about 10 percent between 2012 and 2014.
1. Vanguard Institutional Index Fund
The top fund manages $84.5 billion in assets across the 50,000-plan universe tracked by Compass. That amounts to about 17 percent of the assets managed throughout the Vanguard family.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
