Data & Research July 9, 2010

401(k) Participants not as Knowledgeable as Employers Think

A new survey reveals that 401(k) participants don’t know as much about plan fees and investing as employers think they do.

Reported by

The 11th Annual Transamerica Retirement Survey found many of the legislative and regulatory proposals regarding fee disclosure designed to offer summarized information and electronic delivery should be well-received by workers. A majority of workers surveyed prefer some type of summary in regards to fee information (55%), and respondents have a strong preference for electronic delivery of fee information – 74% would like it to be available on the plan provider’s Web site and/or electronic statements.

However, the survey also found a significant impediment to any new legislation or regulation’s potential effectiveness in informing workers is that 401(k) plan sponsors do not seem to be concerned with the issue. Approximately two-thirds of plan sponsors surveyed indicate they are not interested in receiving more information about fees.

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In addition, approximately seven-in-ten plan sponsors say they think their employees are aware of fees, while only just over a quarter of workers say they are aware.

Although the majority of employers and workers agree that workers are receiving the right information to make decisions about the plan, most workers (68%) say they do not know as much as they should about retirement investing, and very few workers know “a great deal” about asset allocation (6%). More than half (51%) of workers guessed at their retirement savings needs.

Transamerica said the survey offers some promising insights on where to focus communication efforts to help raise levels of participant awareness and education. A large percentage of workers rely on financial Web sites, family and friends, financial planners/brokers, retirement plan provider Web sites, and print newspapers and magazines for education. Workers also state that larger tax-breaks and educational material that is easier to understand would motivate them to learn more about saving and investing for retirement. 

The survey report can be accessed from http://www.transamericacenter.org. 
The Markets July 9, 2010

Institutional Investment Managers Lower Growth Expectations

Institutional investment managers have moderated their expectations for global growth in the face of European debt concerns, according to a quarterly survey conducted by Northern Trust Global Advisors (NTGA).
Reported by

More than two-thirds of those surveyed (68%) expect that sovereign debt concerns regarding Portugal, Italy, Ireland, Greece and Spain will weigh on global markets for more than six months.  As a result, 21% of managers have reduced exposure to these countries, while the majority of managers (57%) have avoided these countries altogether, according to a press release. 

In a significant shift from the prior four quarters, a majority of managers no longer expect global growth to accelerate over the next six months. Seventy-five percent of those surveyed by NTGA in the second quarter anticipate that global growth will remain the same or decelerate, while 25% still expect growth to accelerate. 

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Accordingly, institutional managers are less concerned about the prospect of inflation or rising interest rates. 

Managers are also increasingly optimistic about market valuations. For the first time since the second quarter of 2009, the majority of managers (62%) stated that the U.S. equity market, as measured by the S&P 500 Index, is undervalued, the press release said. Select areas of international markets are also seen to be attractive: 40% of managers now believe that emerging market equities are undervalued. 

Other findings from the survey include: 

A shift in expectations of market volatility, as 29% of managers expect the Volatility Index (VIX) to decrease over the next six months, up from only 9% that held that view in the first quarter. More than 40% believe volatility could increase over that period, down from 51% with that expectation in the first quarter survey. 

Reflecting managers’ views of the market, 62% believe the S&P 500 Index is undervalued, compared to 16% who believe the market is overvalued. Regarding international markets, 53% of managers surveyed believe that Japanese equity markets are undervalued, unchanged from the first quarter; while 40% believe emerging markets are undervalued, up from 32% in the first quarter. 

Investment managers cited technology, energy, health care, emerging markets, and industrials as the top five most attractive market segments.  Consumer discretionary slipped out of the top five, while emerging markets moved up in the rankings.   

A growing number of managers (80%) are confident that interest rates will be steady over the next quarter. This figure is up from 66% in the first quarter. About 18% of managers surveyed expect interest rates to rise, compared to 32% in the first quarter. 

Concerns over global inflation diminished, with just 19% of managers saying they expect increased inflation in the next six months compared to 46% in the first quarter. An increasing majority of managers (60%) predict that global inflation will remain the same.   

Nearly a third of managers (31%) stated that they are more risk-averse compared to three months ago, up from 23% in the first quarter. At the same time, portfolio concentration has increased, with 24% of managers saying their portfolios are more concentrated compared to 10% in the last survey.  That stated, 79% of managers are within their normal range of cash holdings, holding steady from the first quarter survey.  

The survey of approximately 90 institutional managers was conducted by NTGA, the multi-manager arm of Northern Trust Corp., among managers who participate in NTGA's external manager platform in mid-June.  

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