What's a co-manufactured investment product?

Co-manufacturing refers to several investment firms working together to design, manage, and distribute a new product offering. And in the retirement industry, this teamwork is responsible for creating a customized, competitively priced TDF that often lowers asset-based fees for plan sponsors and their participants.

Collaboration typically involves a few partners:

• An asset manager brings their investment capabilities and multi-asset allocation strategies to the co-manufactured fund’s underlying investments. The asset manager typically uses their existing mutual fund TDF as the foundation of the co-manufactured product.
• A retirement plan recordkeeper administers the plan and typically offers a proprietary stable value product to replace a portion of the fixed-income allocation of the asset manager’s mutual fund TDF.
• A trust company who legally holds the fund’s assets. 
• A (38)/3(21) fiduciary uses discretionary and/or advisory authority to manage the underlying investments of the co-manufactured target-date product on behalf of the trust company.

Co-manufacturing typically starts with mirroring the glide path and investment strategies of an existing mutual fund TDF. New features are then added, including replacing a portion of the glide path with a proprietary stable value product from the recordkeeper. This creates a new co-manufactured TDF that’s exclusively offered to the recordkeeper’s or financial professional’s clients.

How is co-manufacturing innovating TDFs?

TDFs are a cornerstone of the retirement plan industry—96% of plan sponsors use them as their qualified default investment alternative.² And they continue to be popular among participants, capturing 46% of all plan assets, on average, in 2024.² 

But what’s changed recently is the structure of TDFs. In 2024, collective investment trusts (CITs) surpassed mutual funds as the leading target-date investment, accounting for more than 50% of the nearly $4 trillion target-date market.³ CITs are governed by state banking laws and are only available to qualified retirement plans, such as 401(k)s. And since CITs aren’t sold to the public the way mutual funds are, they don’t have the same registration, marketing, and administrative requirements that drive up mutual fund costs. 

Co-manufactured TDFs are typically structured as a CIT and are driving innovation for plan sponsors by providing:

• Differentiated products—In order to attract and retain a competitive workforce, plan sponsors are looking for ways to differentiate their employee benefits, including their retirement plan offerings. Co-manufacturing gives plan sponsors access to custom-built target-date portfolios from some of the industry’s leading investment managers.
• Greater flexibility in plan design—Co-manufactured fund products can help increase flexibility in plan design. These series can offer more product design options by partnering with different fund companies that have varied investment management styles for TDFs (such as active, passive, or hybrid).
• Potential to reduce volatility risks—Typically, the recordkeeper’s stable value product replaces a portion of the fixed-income allocation within the co-manufactured TDF’s glide path. Stable value products generally deliver more consistent returns than high-grade bonds of similar duration,⁴ which can help reduce potential losses from longevity risks, market volatility, and other risk factors.
• Options that may lower costs—Co-manufactured funds may offer lower expense ratios compared to traditional TDFs due to their CIT structure and the partnerships involved. This cost efficiency can be beneficial for both plan sponsors and participants, helping to maximize their net return on investment. Pricing credits may be offered, which are based on the percentage of plan assets allocated to the co-manufactured TDF. Generally, the more assets invested in a TDF, the higher the potential pricing credit. Plan sponsors should understand how these credits work—and how they may vary by platform and fund allocation—when evaluating a co-manufactured offering. 

What are the implications for plan sponsors and participants?

Co-manufacturing keeps what participants like about TDFs—a simplified, one-step investment to save for their retirement—and aims to change what plan sponsors don’t like—rigid plan design and high expense ratios. With flexible pricing and customized portfolios, co-manufactured TDFs are helping plan sponsors move beyond the confines of off-the-shelf mutual funds. Plan sponsors and financial professionals can work together to create an exclusive, differentiated TDF that may lead to better retirement outcomes and lower plan costs.

1 “The State of the Target-Date Market: Mid-Year 2024 – Examining Asset Trends Across Providers, Products, Vehicles, Management Styles, and Glide Path Structures,” Sway Research, August 2024. 2 “CITs Dethrone Mutual Funds as the Most Popular Target-Date Vehicle,” Morningstar, 2024. 3 “NEPC’s 19th Annual Defined Contribution (DC) Plan Trends and Fee Survey,” 3/6/25. 4 “Stable value at a glance,” The Stable Value Investment Association, 12/31/24.

For complete information about a particular investment option, please read the fund prospectus or offering memorandum/trust documents. You should carefully consider the objectives , risks, charges and expenses before investing. The prospectus or offering memorandum/trust documents contains this and other important information about the investment option and investment company.  Please read the prospectus or offering memorandum/trust documents carefully before you invest or send money. Prospectus or offering memorandum/trust documents may only be available in English.