Plan Sponsors Look to Make Shifts in Investment Lineups

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Plan sponsors’ desire to reduce plan costs is substantially impacting their approach to investment menu design and their relationships with DC investment managers. But the impact of the resulting activity varies by plan as well as by asset manager. Overall, 7% of plan sponsors intend to add at least one manager to their investment lineup in the next year. At the same time, 2% plan to drop a manager and 16% intend to do a combination of adding and dropping managers, suggesting that the future is not necessarily secure for all firms.

Plan Sponsors Adding and Dropping Investment Managers

When asked specifically about the managers they will continue to use, 29% of plan sponsors intend to award new business to existing firms while only 15% plan to pull business away—evidence that plan sponsors are concentrating their assets with the smaller number of managers they know. Continue reading

DC Investment Managers Fighting to Survive

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Fighting to Survive

It’s tough being a DC investment manager these days. Plan sponsors are offering fewer investment options within their 401(k) plans than in the past—an average of 13 today compared with upwards of 20 in previous years—and consequently are reducing the number of investment managers they include in their plan lineups all in an effort to
reduce plan costs. Brand awareness is down significantly for many DC investment managers this year, suggesting that plan sponsors are less eager to add new managers to their lineups than they have been in the past. As a result, consideration scores are lower for several investment managers this year.

Plan sponsors’ heightened focus on fees is even more evident in the reasons they cite for dropping an investment manager. For the first time in our survey, the desire to cut fees and expenses outranks investment underperformance as the most common reason plan sponsors would end a relationship with an investment manager. In fact, more than one-third (34%) of Mega plan sponsors, those with at least $500 million in plan assets, cite the need to reduce fees/expenses as a reason for dropping an investment manager. Continue reading

Hunting for Opportunity in the Institutional Market

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Hunting for OpportunityWithin the institutional market, the size of an organization’s asset pool is a good indicator of their likelihood to add new managers to their investment lineups within the next 12 months. Our US Institutional Investor Brandscape® report, just published in March, showed that institutional investors, particularly those managing smaller asset pools, are less likely to anticipate adding new managers to their lineups in the next 12 months than they were a year ago. While at first this may be disheartening, it is important to note that an opportunity still exists for new managers to secure a place in the lineup of larger institutions.

With 70% of pensions with $1B+ in assets and 63% of larger non-profits looking to add at least one new asset manager within the next year, asset managers looking to expand their books of business would be well served to look to these larger institutions.

In addition, asset managers have a greater opportunity this year to deepen their existing relationships with institutional clients. In what is likely welcome news for incumbent providers, we found that both pensions and non-profits report a stronger intention to boost their investments with their current managers or change the mix of investments with the firms already on their lineups. Continue reading