ETFs continue to struggle to gain traction in the DC market, with little or no interest in the large market for plans with more than $100 million and tepid interest at best in the smaller markets. The reason? Plan sponsors are able to get index funds, collective trusts and SMAs for the same cost, or less, without the additional administrative costs and trading issues.
The number of plans offering ETFs dropped from 2.5% in 2011 to 2.3% in 2012, according to a Callan study. Cerulli estimated that in 2011 only 0.2% of DC assets were in ETFs, which equates to $6 billion. Perhaps the most revealing statistic is that of Vanguard’s $287 billion in ETFs, less than $1 billion is in DC plans.
But before we declare the patient dead, Schwab is planning to offer their all-ETF platform, an extension of their already released index program that highlights advice. (We posted about the Schwab program here.) And advisors are using ETFs to build portfolios rather than offer them as a core investment, with many asset allocators using ETFs as building blocks for a lot of their strategies.
