“Co-exist” is the bumper sticker research message from Cerulli Associates. The Boston-based global analytics firm suggests that managed accounts should complement, rather than compete with, target date funds as a QDIA choice.
“Despite added customization features, a number of hurdles exist for managed accounts if they are going to effectively replace target-funds as a QDIA,” Cerulli reports. “They have a place in DC plans, but are more fitting as a complement to target-date funds. Managed accounts are an appropriate solution for older, wealthier investors who are solidifying their retirement plans.”
As the firm notes, whether actively or passively managed, target-date funds have a demonstrated track record of bringing multi-asset-class solutions to retirement plans, and investors have been overwhelmingly receptive. According to a Cerulli survey, 64 percent of asset managers rate being the primary manager of a target-date fund as a major opportunity.
In a separate (but related) matter), Cerulli reports mutual fund flows increased in size during March, with the vehicle gathering $17.9 billion. Overall, flows in the first quarter totaled $16.2 billion. Flows, coupled with strong March equity returns, led to asset growth of 4.9 percent in March and 0.2 percent during the first quarter.
Bolstered by March’s equity market rebound, ETF assets shot up 7.3 percent during the month to finish at $2.16 trillion. Flows steadied after a disappointing start to the year, with the vehicle bringing in $30.6 billion during March.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
