Passive exposure to defined contribution plans just isn’t only a function of fund selection. It varies by asset class: passives dominate core equity exposures, while lively investments proceed to predominate in fixed income and other less indexed segments. The amount also increases throughout the goal date funds as allocations to those funds increase.
The magnitude of the shift varies considerably. For small-blend stocks within the US, for instance, lively strategies fell from 65% of funds in 2013 to simply 21% in 2023. Similar, although less pronounced, patterns emerge in other core stock categories. In contrast, fixed income segments akin to high yield and core plus bonds proceed to be more actively managed.
The shift towards passive can also be visible across all plan sizes. A decade ago, smaller plans were much more prone to depend on lively strategies. Today, that gap has largely closed as smaller plans adopt rate of interest index strategies like their larger counterparts.
These findings come from quite a lot of Analyzes for the DCIIA Retirement Research Center, which examines how DC core menus have performed over the past decade, using plan investment data from the 2013 to 2023 filing years.
In the primary piece we summarized for we examined changes to the core menus. In our second article summarized here, we examine changes in the supply and use of passive investment strategies.
