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ETFs in the US target small to medium DC plans


Research firm Cerulli Associates has revealed that in the US more ETF sponsors are focusing distribution efforts on small- and mid-sized defined contribution (DC) plans (those with assets less than USD250 million).

The firm writes that as the online advice delivery market is flourishing, there has been a revived effort to bring ETFs to DC plans. The DC space may become an area of focus for these firms, especially in areas such as micro plans.
The firm found that ETFs make up less than half a percent of investment vehicles used in 401(k) plans.
The recent decline in mutual fund assets during the third quarter of 2015 (down 7.2 per cent since June month-end) can be largely attributed to retreating equity markets, the firm writes. “ETF assets also fell during September, dropping by 2.2 per cent to finish the month at USD1.96 trillion. Flows were a notable bright spot for the vehicle as they rebounded from a tepid August, reaping USD16.7 billion in September,” the firm writes.
Meanwhile, Cerulli finds that Collective Investment Trusts (CITs) are gaining more attention overall in the industry. “The commingling of assets enables CIT sponsors to capitalise 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.

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