From the blog: A 15 per cent growth in the diversified growth fund market in one year is a handsome but not totally unexpected rate of progress. But this concentrated market swinging open its doors to new players and pension fund money is much more interesting.
By the end of 2014, the DGF market had grown to £124bn in assets. These gains have largely been enjoyed by a handful of managers – 71 per cent of the assets are held by just five providers.
By the end of 2014, the DGF market had grown to £124bn in assets. These gains have largely been enjoyed by a handful of managers – 71 per cent of the assets are held by just five providers.
Top five take the lion's share...
Source: Spence Johnson analysis
But latest data from research provider Spence Johnson estimates this stronghold over schemes' favourite volatility-reducing product will reduce by close to one-fifth by 2019.
...But that's all set to change
Source: Spence Johnson analysis
In its Deeper Perspectives report published today, Spence Johnson said: "We stand by last year’s forecast that the asset spoils of the future will be more evenly shared," adding, "the share of the top five have fallen over the last year with the share of other DGFs increasing."
This expansion of the market will undoubtedly be welcome news for those providers looking to take a share of the ever-growing defined contribution space. Defined benefit pension funds still make up more than £50bn worth of the DGF market's £124bn of assets.
DGF market size
Source: Spence Johnson analysis
So what will this broader market mean for those pension funds still pouring money into the vehicles?
One possibility is that an already very diversified spread of DGF products will become even wider.
Asset base of selected DGFs by investor type
Source: Spence Johnson analysis
If choosing a suitable DGF product for your scheme was already a daunting task, it could be about to get that bit harder.
However, with more players fighting for assets, pension funds could end up in a stronger bargaining position.
