The Investment Company Institute published a press release entitled, "Retirement Assets Total $29.1 Trillion in First Quarter 2019," which shows that money market funds held in retirement accounts total $400 billion, or 13.0%, of the total $3.079 trillion in money funds. MMFs represent 4.4% of the total $9.048 mutual funds in retirement accounts. The release says, "Total US retirement assets were $29.1 trillion as of March 31, 2019, up 7.4 percent from December 2018. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of March 2019." (Note: Welcome to Boston for those of you attending our 11th annual Crane's Money Fund Symposium, at the Renaissance Boston Waterfront, June 24-26! Watch for coverage and highlights in coming days. Attendees and Crane Data subscribers can access conference materials via our "Money Fund Symposium 2019 Download Center.")
It continues, "Assets in individual retirement accounts (IRAs) totaled $9.4 trillion at the end of the first quarter of 2019, an increase of 8.3 percent from year-end 2018. Defined contribution (DC) plan assets were $8.2 trillion at the end of the first quarter of 2019, up 8.2 percent from year-end 2018. Government defined benefit (DB) plans -- including federal, state, and local government plans -- held $6.3 trillion in assets as of the end of March 2019, a 6.2 percent increase from the end of December 2018. Private-sector DB plans held $3.2 trillion in assets at the end of the first quarter of 2019, and annuity reserves outside of retirement accounts accounted for another $2.1 trillion."
ICI accompanying tables show money funds accounting for $267 billion, or 6%, of the $4.372 trillion in IRA mutual fund assets and $133 billion, or 3%, of the $4.676 trillion in defined contribution plan holdings in Q1'19. A year earlier (Q1'18), money fund assets in IRAs totaled $232 billion (5%) and in DC plans totaled $123 billion (3%).
In related news, ICI also published a press release entitled, "BrightScope/ICI Data Show Diverse Range of 401(k) Investment Options," and a study entitled, "The BrightScope/ICI Defined Contribution Plan Profile: A Close Look at 401(k) Plans, 2016," last week, which reviewed trends in the retirement savings market. While sparse on money market mutual fund mentions, the report did have a few brief ones.
The "Key Findings" introduction says, "Equity funds accounted for the largest share of assets in 401(k) plans. In 2016, 43 percent of large 401(k) plan assets were held in equity funds, 25 percent were held in balanced funds (with most of that being held in target date funds), and 7 percent were held in bond funds. GICs and money funds accounted for 11 percent of assets."
The study tells us, "Forty‑four percent of large 401(k) plans offered money funds, and more than two-thirds offered guaranteed investment contracts (GICs).... In 2016, large 401(k) plans included three bond funds (mostly domestic) in their investment lineups, on average (Exhibit 2.5). Plans also offered money funds, GICs, and other options. These investments were not offered as widely (Exhibit 2.4) and were often included as the single choice in that investment type (Exhibit 2.6).... Forty-four percent of large 401(k) plans offer one money fund on average, and about two-thirds of large 401(k) plans offer one GIC on average."
On asset allocation, ICI writes, "Although employers choose the investment options offered in 401(k) plans, participants generally choose where to allocate the money in their accounts among the available options. In 2016, equity funds held the largest share (42.9 percent) of large 401(k) plan assets in the BrightScope database.... Balanced funds held the next largest share with 24.5 percent.... Other investments (which include company stock) followed with 14.8 percent of assets, then GICs with 8.9 percent of assets. Bond funds (mostly domestic) held 7.0 percent of assets, and money funds held 1.9 percent."
Regarding expenses, they state, "Money market mutual funds had the lowest expense ratio of any of the asset classes, with an asset-weighted average expense ratio of 0.19 percent of assets in 2016 for money market mutual funds in large 401(k) plans."
The report continues, "Mutual fund expenses decreased between 2009 and 2016 in 401(k) plans across most asset classes.... Money market mutual funds experienced the largest percentage decline in expenses, falling from 0.31 percent of assets in 2009 to 0.19 percent in 2016. Plans in all size categories experienced decreases in their money market mutual fund expenses on average. For example, in plans with $1 million to $10 million in plan assets, money market mutual fund expenses declined from 0.48 percent of assets in 2009 to 0.28 percent in 2016."
ICI also says, "Similarly, money market mutual fund expense ratios in 401(k) plans with more than $1 billion in plan assets declined from 0.22 percent of assets to 0.14 percent. Some of the decline in money market mutual fund asset-weighted average expenses may be attributable to fee waivers, which increased substantially in money market funds because of the low interest rate environment following the market turmoil of 2007–2009."
It adds, "The asset-weighted average expense ratio for international equity mutual funds fell 23 basis points, from 0.83 percent in 2009 to 0.60 percent in 2016, and money market mutual fund expenses fell by 13 basis points, from 0.32 percent in 2009 to 0.19 percent in 2016."
A footnote tells us, "Asset allocation in the BrightScope Defined Contribution Plan Database is broadly similar to the EBRI/ICI 401(k) database. At year-end 2016, the EBRI/ICI 401(k) database shows that equity funds held 43.5 percent of assets, balanced funds held 27.4 percent; bond funds held 8.2 percent; money funds held 3.1 percent; GICs and other stable value funds held 5.8 percent; and company stock, other, and unknown assets accounted for the remaining 11.9 percent of assets."
