Five Trends Shaping Asset Allocation in Core DC Menus

As target-date funds continue to absorb a growing share of plan assets, core menu allocations are becoming increasingly concentrated in US large-cap equities, with a growing tilt toward growth, while fixed-income diversification remains limited.

Drawing on a decade of 401(k) plan data, this analysis examines the changing composition of core menu allocations. The full research was recently released through the DCIIA Retirement Research Center.

There are five notable trends we think investment professionals need to be aware of given the growing importance of defined contribution (DC) plans as a primary retirement savings vehicle for American workers.

1. Target-Date Funds (TDFs) Are Taking Over

Default investments, in particular TDFs, continue to capture an increasing portion of plan assets. With more than $4 trillion in assets, TDFs have emerged as the predominant default investment option in DC plans, vastly exceeding assets in the other two “qualified” options, which include balanced funds and managed accounts. Consensus estimates suggest TDFs have about 40% of DC assets today and could increase to over 50% by the year 2030[1].

The impact of the rise of TDFs has interesting implications on the absolute dollars in traditional core menu funds (think non-default investments) and depends both on how the aggregate size of the DC market evolves and whether other default options gain acceptance in the future. For example, Cerulli (2025) forecasts that total DC assets could increase from $13.6 trillion in 2024 to $19.3 trillion by 2030. Therefore, even if TDFs continue to gather assets, core menu assets could remain flat, or even be net positive, especially if managed accounts and other default investment structures that build portfolios leveraging the core menu continue to gain traction.

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