State-Sponsored Retirement Plans Can Succeed, but Asset Growth Will be Gradual

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State-Sponsored Retirement Plans Can Succeed, but Asset Growth Will be Gradual

Asset managers recognize that they are playing the long game if they choose to participate in this market segment

June 2019, BOSTON - This issue of The Cerulli Edge—U.S. Monthly Product Trends Edition analyzes mutual fund and exchange-traded fund (ETF) product trends as of May 2019. This issue also includes special coverage on the retirement coverage gap. Specifically, it explores the state-sponsored retirement plan landscape and considers the ways that employers can help their employees better save for retirement by offering to help manage their student debt.


Highlights from this research:
• Since 2017, 10 states have enacted legislation for a state-sponsored retirement program and many others are considering similar initiatives. Investment menus are homogeneous across state-sponsored plans and strongly emphasize simplicity and low-cost options. Statistics from the OregonSaves program suggest that mandated state-sponsored retirement plans can succeed in gathering participant accounts, but asset growth will be gradual. Asset managers recognize that they are playing the long game if they choose to participate in this market segment.


• Although mutual funds gathered positive net flows ($13.3 billion) during May, it was not enough to drive asset growth. Assets in the vehicle declined 4.0% to $14.7 trillion. ETF assets fell 5.0% during May, amidst equity market upheaval, closing the month at $3.7 trillion. Another drag on ETF growth during May was net negative flows of $13.9 billion.


• In a 2Q 2019 Cerulli survey of 401(k) plan participants, 12% of participants under age 30 and 8% between ages 30 and 39 identify student loan debt as their most significant cause of financial stress. Employers are looking to recordkeepers and other service providers for new approaches to help their workers manage their student loan debt. Cerulli believes that student loan debt assistance benefits can help employers attract and retain young talent, particularly in industries with competitive labor markets.

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NOTES TO EDITORS:
These findings and more are from: The Cerulli Edge—U.S. Monthly Product Trends Edition, June 2019 Issue.

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