By Cyril Tuohy
New research by the consulting firm Cogent Reports has found that over the past year four new investment managers have come up in conversations among defined contribution plan sponsors considering changes in their investment lineups.
Many plan sponsors meet with advisors to review their employer-sponsored retirement plans once a year to make sure retirement funds still meet the needs of employees, and investment products offered by asset managers J.P. Morgan Asset Management, Goldman Sachs, Prudential Financial and John Hancock Funds are more likely to be mentioned than in the past.
Linda York, vice president of Cogent Reports, which published the results, said in a news release that the four asset managers have caught plan sponsors’ attention because of their differentiation and thought leadership.
York said it’s often difficult for companies to differentiate themselves in a marketplace crowded with hundreds of companies vying for trillions of dollars in assets.
“Thought leadership offers a great path forward for firms struggling to break through the clutter,” York said. “Only a handful of investment managers excel at thought leadership in the eyes of plan sponsors, yet it is critically important to driving consideration.”
The results are published in Cogent Reports’ annual DC Investment Manager Brandscape study, which compiled the data from an online survey of a cross section of 620 plan sponsors from February 21 to March 6.
The 2015 edition of the Brandscape study found that defined contribution plan sponsors expecting to change their investment mix are most likely to consider, in descending order: Vanguard, Fidelity, BlackRock, J.P. Morgan Asset management, American Funds, Goldman Sachs, Prudential Financial, John Hancock Funds, T. Rowe Price and Charles Schwab Investment Management.
J.P. Morgan Asset Management, Goldman Sachs, Prudential Financial and John Hancock Funds were outside the top 10 last year.
The remaining six top-10 asset management companies traded places this year compared with last year.
Vanguard grabbed the No. 1 position from Fidelity and BlackRock leaped to the No. 3 position from the No. 8 position in 2014, notching the biggest gain among the top-10 companies.
The defined contribution marketplace, made up of 401(k)s, 403(b)s, 457 plans, Federal Employees Retirement System, Thrift Savings Plans and individual retirement accounts held $14.3 trillion in assets at the end of the third quarter last year, according to data from the mutual fund trade group Investment Company Institute.
Defined contribution plan assets hold about 27 percent of U.S. retirement assets, according to ICI data, and the plans are expected to grow as lawmakers encourage Americans to boost private retirement savings.
York also said that every time a plan sponsor decides to review an investment lineup, it provides an opportunity for investment managers “to gain further traction in the defined contribution space.”
She said the four newcomers in this year’s top 10 list is a demonstration that “sizable results can be achieved with the right strategy in place.”
Competition in the 401(k) market is growing. Many 401(k) companies have seen profit margins shrink as consolidation points to a future dominated by mutual fund complexes offering dozens of investment choices, the costs of which are spread across millions of participants.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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