Callan DC Index™
Underlying fund performance, asset allocation, and cash flows of more than 130 large defined contribution plans representing approximately $500 billion in assets are tracked in the Callan DC Index.
Performance
Index Gains for Third Straight Quarter
The Callan DC Index™ gained 2.4% in 4Q25, which brought the Index’s trailing one-year return to 15.9%. The Age 45 Target Date Fund (analogous to the 2045 vintage) had a higher quarterly return (2.8%) and a higher trailing one-year return (19.3%). Over longer time horizons, the Age 45 TDF’s higher relative equity allocation has contributed to a higher annualized since-inception* return (8.4% vs. 7.8%).
*The Index was created in 2006.
Growth sources
Balances Rise Due to Investment Gains
Balances within the DC Index rose by 1.0% after a 3.5% increase in the previous quarter. Investment gains (2.4%) were the primary cause as net flows (-1.3%) detracted. The net flows figure will continue to provide a critical measure of how effectively plans retain the balances of retiring participants, who often own an outsized share of total plan assets. More broadly positive market performance lifted asset values even as participants continued to withdraw assets. With turnover at minimal levels, these trends point to structural cash movement, rather than active reallocation, as the primary driver of flows.
Turnover
Net Transfer Activity Remains Negligible
Turnover (i.e., net transfer activity within DC plans) was just 0.01% in 4Q25, its lowest level since Index inception and well below the historical average of 0.51%.
This muted activity indicates minimal participant-driven reallocation across asset classes during the quarter, reinforcing that changes in asset allocation were largely driven by market performance rather than investor behavior.
Net cash flow analysis
U.S. Equity Falls Sharply for Seventh Straight Quarter
Automatic features and their appeal to “do-it-for-me” investors have historically led target date funds (TDFs) to receive the largest net inflows in the DC Index. However, in 4Q25, TDFs experienced net outflows of 2.5%.
With turnover at historically low levels, even modest flows had an outsized impact on asset class flow percentages. The combination of low turnover and negative flows suggests that asset movement was primarily driven by external factors—such as withdrawals—rather than participant reallocations within the plan.
Within equities, outflows remained pronounced, with U.S. large cap equity (-48.3%) and U.S. small/mid cap equity (-17.7%) continuing the trend of significant withdrawals observed in prior quarters.
In contrast, select diversifying and inflation-sensitive asset classes saw inflows, including real estate (31.2%), emerging markets equity (29.7%), and specialty equity/sector funds (18.0%), while U.S. fixed income also experienced notable inflows (21.1%), suggesting some movement toward more defensive positioning.
Notably, within equities, investors withdrew assets from U.S. large cap equity (-35.5%) and U.S. small/mid cap equity (-13.3%), similar to the large outflows of previous quarters.
Equity allocation
Exposure Rises and Sits Above Long-Term Average
The Index’s overall allocation to equity (75.3%) rose slightly from the previous quarter’s level (75.1%). The current equity allocation continues to sit above the Index’s historical average (69.1%).
Asset allocation
U.S. Large Cap Equities Outperformance Leads to Gains
U.S. large cap equity (29.4%) was the asset class with the largest percentage increase in allocation despite outflows, signaling the asset class was an outperformer. Conversely, stable value (4.9%) and target date funds (36.3%) experienced the largest declines in allocation.
Prevalence of asset class
Money Market Funds Rise
In the prevalence of funds table, the green bars indicate the prevalence of asset classes within DC plans, while the blue bars show the average allocation to particular asset classes when offered as an option.
The prevalence of money market funds (56.1%) rose by 0.8 percentage points. Other notable movements included a 0.8 percentage point decrease in the prevalence of global equity offerings (18.9%).
Management fee data
The DC Fee Analysis chart shows the average total investment management fee by plan size, as well as the average share of plan assets allocated to active and passive options. Fees for each fund (including mutual funds, collective trusts, and separate accounts) within a plan are asset-weighted to determine the average total fee. This exhibit will be updated annually with the release of third quarter DC Index results, and this updated data should be available shortly.
Using 3Q23 data, for plans with assets less than $500 million in assets, the average asset-weighted fee decreased by 3 basis points from 3Q22. Plans with assets between $500 million and $1 billion saw the largest fee decrease of 9 bps, while the fee for plans with more than $1 billion in assets had a decrease of 4 bps. Fee decreases were largely driven by a combination of increased use of passive mandates as well as lower breakpoints and new lower fee vehicles and share classes for actively managed options.