Business
Morningstar Report Finds Contributions to Target-Date Strategies Rebounded in 2021 Led by Record Growth of Collective Investment Trusts
CHICAGO, March 23, 2022 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its annual
About this update from Morningstar, Inc.
[{"type":"text","content":"CHICAGO, March 23, 2022 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today published its annual Target-Date Strategy Landscape Report, which found that total assets in target-date strategies grew to a record $3.27 trillion at the end of 2021, nearly a 20% increase over the previous year.\n\"Assets in target-date strategies reached a record high in 2021 as investors poured net contributions of $170 billion into the space,\" said Megan Pacholok, manager research analyst at Morningstar. \"We are also seeing the remarkable advance of collective investment trusts, which made up roughly 86% of 2021's net inflows. Plan sponsors are attracted to the lower costs of these vehicles, and we expect their growing popularity to persist.\"\nThe 2022 report examines the growing trend of collective investment trusts (CITs) as plan sponsors' preferred target-date vehicle, how fees continue to be a key driver in target-date selection, and primary differences between \"to\" versus \"through\" glide paths.\nThe Target-Date Strategy Landscape Report is available here. Key findings from the report include:\nCITs are on pace to overtake mutual funds as the most popular target-date vehicle in the coming years. In 2021, net contribution to CITs outpaced mutual funds $146 billion to $24 billion and accounted for 86% of target-date strategy net inflows. These vehicles now make up 45% of total target-date strategy assets, up from 32% five years ago.Fees continue to influence target-date fund flows. The cheapest quintile of target-date share classes amassed $59 billion in 2021, up from $41 billion in 2020. Collectively, the three more-expensive quintiles had outflows of more than $38 billion.Vanguard Target Retirement collected the most net new money after slipping from the top spot last year for the first time since 2008. It accumulated more than $55 billion of net inflows in 2021, with Fidelity Freedom Index collecting the second most with approximately $45 billion. Overall, the industry remains top heavy as the largest five providers control roughly 79% of target-date market share.Target-date managers have become more comfortable with higher equity stakes over the last decade. In 2021, portfolios 20 years to retirement had a median equity weighting of 82%, roughly one-fifth larger than ten years a...