Vanguard passes Fidelity to become No. 1 in 401(k) assets

Stock market rally in 2013 helped boost numbers; Fidelity remains tops in 401(k) recordkeeping assets

Jun 6, 2014 @ 2:03 pm

Vanguard Group Inc. managed the most money in 401(k)-type retirement plans last year, passing longtime leader Fidelity Investments.

Vanguard had $613.5 billion in defined contribution assets as of Dec. 31, compared with $612.4 billion for Fidelity, according to Pensions & Investments, a trade publication. A year earlier Fidelity managed $523.9 billion while Vanguard had $479.6 billion.

Both companies saw their assets swell as the Standard & Poor's 500 Index last year returned 32%, including reinvested dividends.

“People who sponsor retirement plans are finding low-cost index funds a compelling value and that has been a boon for us,” Chris McIsaac, managing director at Vanguard, said in a telephone interview. Mr. McIsaac estimated Fidelity had held the number one ranking for at least a decade.

Funds that mimic indexes have grown in popularity as investors have become skeptical about the ability of stock pickers to beat the market averages. As the firm most associated with indexing, Valley Forge, Pa.-based Vanguard has ridden the wave to become the largest player in the U.S. mutual fund business.

Fidelity remains the leader in 401(k)-type recordkeeping assets with about $1.4 trillion as of March 31. Recordkeepers administer the accounts, including sending out statements and operating participant websites. Fidelity spokesman Michael Shamrell declined to comment on the rankings.


Americans held $5.9 trillion in defined-contribution plans as of Dec. 31, according to the Investment Company Institute. The most common type are 401(k)s, which have steadily expanded over the past three decades. The plans require workers to manage their own savings, in contrast to traditional pensions that made monthly payouts to retirees from money managed by employers.

Vanguard had $2 trillion in U.S. mutual-fund assets as of April 30, compared with $1.2 trillion for Boston-based Fidelity, which is known for its active style of money management, according to data from Chicago-based Morningstar Inc. The numbers don't include money market mutual funds.

In the first four months of 2014, U.S. equity index funds attracted $30.4 billion in deposits while actively managed funds suffered redemptions of $5.9 billion, Morningstar data show.

Vanguard's retirement business has benefited from the increased acceptance of its target-date funds, which offer investors a way to diversify their holdings within one mutual fund. Vanguard's target-date funds gained $18.3 billion in 2013 compared with $3 billion for Fidelity. The Boston firm still ended the year with the most money in target-date funds, $183.2 billion, according to Morningstar data.

“Over the last 15 years active management has been hard-pressed to justify itself,” Geoff Bobroff, a mutual fund consultant based in East Greenwich, Rhode Island, said in a telephone interview. “Employers are finding comfort in the kind of products Vanguard offers.”

(Bloomberg News)


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