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DC Investment Only Providers

By Fred Barstein • 12/1/2014 • 0 Comments

NAPA Net’s DC Investment Only (DCIO) list is provided below; for a PDF version of the table, click here.

As with other DC service providers, DCIOs are experiencing significant change as the retirement market in general, and the DC market specifically, becomes part of the mainstream. Though it’s infinitely easier to enter the DCIO market than to become a record keeper or BD, there are still barriers to entry. While some asset managers have eschewed the DC market to focus on wealth management and retail advisors, some of the largest overall money managers also dominate the DC market, including Blackrock, Vanguard, Fidelity, American Funds, T Rowe Price and PIMCO. Whether prescient or lucky, asset managers that are well entrenched in DC plans will have a huge advantage as more money flows into retirement accounts and more advisors focus on this sector. 

So what does it take to be successful DCIO? Certainly good-performing, well-priced funds with a long track record helps, but those characteristics are merely table stakes. With most active, equity-based mutual funds in net redemptions, those without a viable TDF strategy or without the benefit of owning a record keeper are looking for a silver bullet strategy. 

Having good or even great value add helps, but there’s no evidence that it will significantly raise DC assets — witness Allianz and Columbia, who have the best value-add in the form of Allianz’ Center for Behavioral Finance, led by Prof. Shlomo Benartzi; and Columbia’s Retirement Learning Center, run by John Carl. 

So what might the future hold? The rich will get richer and smaller providers will make strategic bets without making big investments. If the DOL’s fiduciary rule passes, will it be harder for record keepers to use proprietary funds? Will private equity and hedge fund managers really enter the retirement market? Will advisory group’s CIT efforts like those developed by CAPTRUST and Sheridan Road become prevalent? Will custom TDF, managed accounts, model allocations using DIAs and 3(38) services take hold? Will hybrid or outsourced wholesaling finally become viable?

Here are some recent changes in the DCIO market:

  • New initiatives:
    • Cohen Steers — The well-heeled, Manhattan-based real asset manager hired industry veteran Matt Gannon, who is looking to expand.
    • RS Investments — Funded by Guardian, RS hired Jonathan Dues, formerly of Mesirow, to expand their footprint.
    • Manning & Napier — Taking a more traditional route, Manning & Napier has hired a full cadre of external DCIO wholesalers.
  • Lord Abbett — Bucking the trend of focusing on advisors, Lord Abbett has reallocated resources to go after bigger plans directly.
  • TIAA-CREF — With its acquisition of Nuveen, CREF will try to distribute its funds beyond the higher ed market, which it dominates.
  • PIMCO — What does this bond giant look like after Bill Gross?
  • JP Morgan — With the sale of their large-market record keeper, JP Morgan is now free to focus on the DCIO market. It has also reorganized, with retirement czar Mike Falcon going international; more personnel changes are rumored.
  • Putnam — Taking the opposite tack from JP Morgan, Putnam will now have the benefit and burden of owning a massive record keeper.
  • RCAP — The sister company of the non-traded REIT giant has become the second largest indy BD overnight. It’s likely that the retirement market will be a key strategy after it figures out how to integrate the 12 BDs and overcomes accounting blunders.