How Asset Allocation Is Changing in Core 401(k) Menus

Five Trends Shaping Asset Allocation in Core DC Menus

Defined contribution plans have become a central pillar of the US retirement system, and the asset allocation embedded in their core menus is evolving in ways that investment professionals should not ignore. 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.

2. US Large-Cap Equity Dominance Is Increasing

Among non-default options, US large-cap equities account for the largest share of core menu allocations, and that share has increased over time, likely reflecting the strong recent performance of US large-cap stocks.

The weights to the respective US market-cap groups (large, mid, and small) are somewhat surprising, especially when viewed against US or global equity market capitalization. For example, US large-cap equities hold roughly four to five times more assets in core menus than US mid- and small-cap equities, even though mid- and small-cap equities represent a much larger share of total market capitalization (approximately 16 and 25 times greater, respectively). This gap suggests that menu availability, rather than market size, plays a significant role in shaping allocations.

3. Growth Trumps Value:

While US large-cap growth funds are only slightly more prevalent than US large-cap value funds in core menus, they hold more than twice the assets, and their share of allocations has increased over the past decade. Growth allocations also tend to exceed those of other US equity styles, although the differences narrow at smaller capitalization levels.

This growing growth tilt is consistent with the strong recent performance of growth stocks, but it also increases exposure to style rotation risk should market leadership shift toward value.

4. Limited Fixed Income Depth in Core Menus

While options abound for equities, especially US equities, there is generally a relative lack of diversification options within fixed income in core menus. For example, while there are typically close to 12 equity options available in a core menu, the average 401(k) plan in our study only had roughly 4.5 fixed income funds, primarily a single cash option, and two US intermediate bond funds.

Fixed income is likely to be increasingly important if more DC participants decide to stay in the plan during retirement, since older investors tend to select more conservative portfolios. In our view, this makes the limited change in fixed-income offerings in core menus over the past decade a gap that plan sponsors will need to address.

5. Bigger plans are more basic

Larger DC plans tend to offer fewer diversifiers than smaller plans and, as a result, allocate a greater share of assets to more traditional asset classes. This is a somewhat surprising finding, given that larger plans are typically more familiar with the potential benefits of alternative investments, particularly those that also sponsor defined benefit plans. In theory, larger plans should also have greater access to specialized investment options, including private assets, than smaller plans. How this apparent disconnect evolves will be worth watching.

Taken together, these trends suggest that asset allocation within DC core menus is shaped not solely by deliberate portfolio construction, but also by defaults, availability, and plan design choices. For investment professionals, understanding how those forces interact is increasingly important as DC plans continue to play a larger role in retirement savings.

[1] Cerulli (2025)