Exchange traded funds from Vanguard and BlackRock dominate the list of top 20 ETFs by total distribution in the 401(k) and defined contribution business, according to a report this week.
“ETFs are off to a slow start in terms of their distribution in 401k plans but we expect their prevalence to grow dramatically in the future as plan sponsors begin to understand the benefits of including them on plan menus,” said Mike Alfred, CEO of BrightScope, an investment research company.
“The risks of ETFs have been wildly exaggerated,” he added. “In many ways, ETFs are actually less risky than other instruments if the focus is on long-term returns.” [Growing Demand for ETF-Based 401(k)s.]
Some researchers say ETFs increase systemic risk in the markets, although the industry refutes these claims. Many ETFs did have their trades cancelled in the May 2010 flash crash, which has drawn scrutiny. [ETFs are Not Out to Get You]
Total industry assets have surpassed $1 trillion, and ETF managers are trying to increase their presence in the 401(k) and retirement plan market, which is dominated by mutual funds. [Don’t Overlook ETF Risks]
The database that BrightScope used for the research includes over 50,000 plans, which represents about 90% of total assets within the 401(k) marketplace. [TD Ameritrade Offers ETFs on 401(k) Platform.]
According to BrightScope, the top 20 ETFs by total distribution in 401(k)s include:
1. Vanguard Total Bond Market (NYSEArca: BND)
2. iShares Russell 1000 Growth Index (NYSEArca: IWF)
3. Vanguard S&P 500 (NYSEArca: VOO)
4. Vanguard Small Cap Growth (NYSEArca: VBK)
5. iShares Russell 2000 Index (NYSEArca: IWM)
6. iShares Russell 1000 Value Index (NYSEArca: IWD)
7. iShares Russell Midcap Value Index (NYSEArca: IWS)