Passive exposure in defined contribution plans is not simply a function of fund selection. This varies by asset class: passive dominates core equity exposures, while active remains more prevalent in fixed income and other less indexed segments. As the allocation for target-date funds is increasing, it is also increasing.
The magnitude of change varies considerably. For example, in US small mix equities, active strategies fell from 65% of funds in 2013 to only 21% in 2023. Similar, though less pronounced, patterns appear in other main equity categories. In contrast, fixed income segments such as high yield and core plus bonds remain more actively managed.
The shift toward passive is also visible across all plan sizes. A decade ago, smaller plans were more likely to rely on active strategies. Today, that gap has narrowed considerably, with smaller plans adopting index strategies at rates similar to their larger counterparts.
These findings stem from a series analyzes For the DCIIA Retirement Research Center, examine how DC core menus have evolved over the past decade, leveraging plan investment data from filing years 2013 to 2023.
In the first piece, which we Abbreviation For entrepreneurial investorWe detected changes in the main menu. In our second part, in summary, we explore changes in the availability and use of passive investing strategies.
