Horace Mann, one of the largest providers of retirement platforms and insurance products for the education market, is in the process of jettisoning traditional open-end mutual funds for exchange-traded funds in its target date portfolios.

Horace Mann and Wilshire Associates officials confirmed the plans but declined to comment on the change to ETFs, citing the lack of board approval for the changes that Wilshire has recommended. 

Currently, Horace Mann offers a Wilshire Funds series of target date portfolios. Among others, Seligman Investments as well as the XShares Advisors' TDX Independence Funds (distributed through ALPS) also offer target date products that use ETFs.

The insurer contracted with Wilshire Associates to perform a wholesale asset allocation recomposition of the variable annuities for the 403(b) market, using all ETFs in the place of traditional mutual funds.

That project is now completed, says a company insider, and the firm is set to seek approval from the investments' board of directors to make the move to ETFs official.

Wilshire, as one of the active managers being jettisoned from the products, still has its fee revenues coming in from Horace Mann for its asset allocation work on the overall products.

Wilshire will remain at the funds of funds level as an advisor, managing a portfolio of ETFs instead of active funds.

While Wilshire could not comment on the impending change at Horace Mann, a Wilshire official said that in general, this trend will become more prevalent, and low cost is "very much a motivator."

The Wilshire official noted that it already acts as a subadvisor on Payden & Rygel's Payden/Wilshire Longevity Funds, a mix of active funds and ETFs.

Wilshire has a large business in consulting and subadvising to retirement and insurance platforms and expects more of its future work to be ETF-focused, the official added.