It’s no secret, ETF adoption in 401(k)s is pretty dismal. Reasons vary, but most critics agree intraday trading is of little or no value for retirement plan participants, and low-cost investment options can be satisfied elsewhere. However, all that may soon change, driven by (what else?) robo advisors.
A recent survey from Cerulli Associates survey shows more ETF sponsors are focusing distribution efforts on small- and mid-sized defined contribution (DC) plans (those with assets less than $250 million). And as the online advice delivery market is flourishing, there has been a revived effort to bring ETFs to 401(k) plans.
“The defined space may become an area of focus for these firms, especially in areas such as micro plans,” Boston-based Cerulli writes.
Also, according to firm:
- The recent decline in mutual fund assets during 3Q 2015 (down 7.2% since June month-end) can be largely attributed to retreating equity markets. ETF assets also fell during September, dropping by 2.2% to finish the month at $1.96 trillion. Flows were a notable bright spot for the vehicle as they rebounded from a tepid August, reaping $16.7 billion in September.
- Collective Investment Trusts (CITs) are gaining more attention overall in the industry. The commingling of assets enables CIT sponsors to capitalize on economies of scale, thereby offering lower costs, better risk management, and more flexible investment opportunities. Cerulli recommends that asset managers and consultants educate themselves on the potential benefits that CITs may offer their clients as they strive to become vehicle-agnostic in increasingly competitive institutional markets.
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.
