HSA Investment Menu Design Trends

by Blake at Devenir | Originally posted on the Devenir blog

We recently published a white paper sharing some of our views on HSA investment menu design. As a follow up to that piece, we thought it would be interesting to compare past and present HSA investment menus and see if there are any noticeable trends taking place on an industry-wide level. We looked at provider fund lineups as of 12/31/2022 and then went back 5 and 10 years for comparison. This post takes a look at some of the things that stood out to us.

Menu Size

We believe the ideal menu size is between 15 to 30 funds, where the right menu size for a provider will vary based on several different factors. As a reminder, for this analysis we count a target-date fund series and an allocation fund series each as a single option. The average number of funds offered grew from 15 funds in 2012 to 21 funds in 2017 and currently remains at 21 funds.

Active vs Passive Options

The active vs passive topic is highly debated in the financial services industry. We believe it is best to offer a mix of active and passive funds because results can vary by asset class and history suggests that the relationship between active and passive may be cyclical1. In addition, providing both options can be helpful for satisfying various investor preferences. There is a noticeable trend in the active and passive split of investment menus over time. Compared to the past, passive options are now much more common and make up 31% of menus on average as of 12/31/2022.