Passive exposure in defined contribution plans is not just a function of fund selection. It varies by asset class: passive dominates core equity exposures, while active remains more prevalent in fixed income and other less indexed segments. It is also increasing within target-date funds as allocations to them grow.
The magnitude of the shift varies significantly. In US small blend equity, for example, active strategies fell from 65% of funds in 2013 to just 21% in 2023. Similar, though less pronounced, patterns appear across other core equity categories. By contrast, fixed income segments such as high yield and core plus bonds remain more actively managed.
The shift toward passive is also visible across plan sizes. A decade ago, smaller plans were far more likely to rely on active strategies. Today, that gap has largely closed, with smaller plans adopting index strategies at rates like their larger counterparts.
These findings draw from a series of analyses for the DCIIA Retirement Research Center examining how DC core menus have evolved over the last decade, leveraging plan investment data from filing years 2013 to 2023.
In the first piece, which we summarized for Enterprising Investor, we explored changes in core menus. In our second piece, summarized here, we explore changes in the availability and utilization of passive investment strategies.
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