Indexing in defined contribution plans 2006 to 2016

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Driven almost exclusively by the addition of index target-date options to investment menus, indexing in Vanguard-administered defined contribution (DC) plans has increased sharply since 2006.

Allocation of DC plan assets. A decade ago, the fraction of actively managed assets exceeded the fraction of indexed assets within Vanguard DC plans. By year-end 2016, 51% of Vanguard DC plan assets were invested in indexed or passively managed options, 32% were invested in actively managed options, and the remaining 17% were invested in “nonindexable” assets—money market, stable value, and company stock options.

Growth of indexed plan assets. Since 2006, the percentage of Vanguard DC assets invested in index options has increased by 20 percentage points, a relative growth rate of 60%. Index target-date options were the fastest-growing asset class. By 2016, 1 of every 4 dollars was invested in index target-date options.

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