Three-Fourths of Investors Prioritize Protection Over Performance as a Goal for Their Financial Portfolios

December 4, 2020 — Boston

This issue of The Cerulli Edge—U.S. Monthly Product Trends analyzes mutual fund and exchange-traded fund (ETF) product trends as of October 2020, explores asset managers’ increased focus on offering model portfolios, and discusses the need for guaranteed retirement income solutions within defined contribution (DC) plans.

Highlights from this research:

  • Mutual fund assets declined 1.5%, sitting just above $16.2 trillion at the end of October. Net flows dipped below zero for the second straight month, with mutual funds ceding $15.3 billion. Despite falling by 0.8% over the course of October, ETF assets remain above the $4.7 trillion threshold. The asset decline was nearly half that of mutual funds, mitigated by the addition of $32.1 billion in net flows gathered during the month.
  • Investors are far more concerned with the outcomes of their advice relationships than with the mechanics of their portfolios. Asset managers have increased their focus on offering model portfolios, with limited success to date for most. To gain traction, model providers will need to offer truly differentiated strategies that objectively increase the probability of clients achieving their financial goals.
  • Cerulli believes that guaranteed retirement income solutions should be part of a portfolio of products for retired investors. The most challenging aspect of offering retirement income products through a defined contribution plan is educating investors on the inherent tradeoffs between maximizing the contradictory factors of guaranteed income, income maximization, and liquidity. Despite more favorable regulatory protections for offering annuities, demand remains limited. In Cerulli’s 2020 Target-Date Manager Survey, 64% still cite lack of plan sponsor demand for guaranteed retirement solutions. Cerulli believes annuitization products, where an investor converts a lump sum to a guaranteed income stream, represent the better solution for DC plans.

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Note to editors

These findings and more are from The Cerulli Edge—U.S. Monthly Product Trends, November 2020 Issue.

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