The Markets May 16, 2013

Pension Risk Transfer Attractiveness On Even Keel

Even through a waning rate environment, the relative attractiveness of annuitizing pension liabilities stayed stable.
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The Dietrich Pension Risk Transfer Index took a slight dip from April’s 86.61, settling at 85.81 as of May 1. Declining interest rates for the third straight month drove the change, pushing down on pension funding levels. The index’s current annuity discount rate proxy of 2.39% continues trending downward ever so slightly, while its spread versus Treasuries is widening.

Rate volatility has been an issue for a while, according to Geoff Dietrich, vice president of Dietrich & Associates. He noted, however, that annuity purchase rates have been relatively steady. “If history repeats itself, then we expect to see a favorable window of opportunity opening up in the coming months,” Dietrich said. “Get prepared and stay tuned. The roller coaster ride continues.”

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The Dietrich Pension Risk Transfer Index can be found here.

The Markets May 16, 2013

Mutual Fund Inflows Moderate in April

Inflows for long-term mutual funds during April stood at a healthy $37.8 billion, according to a report from Morningstar, Inc.
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However, inflows continued to moderate from levels seen earlier this year. Inflows for U.S. equity funds slowed to $895 million, their lowest intake this year. Despite tepid interest in core, intermediate-term bond funds, taxable-bond funds overall took in $19.4 billion to mark their 20th consecutive month of inflows.

Morningstar data also showed: 

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  • International-equity funds saw the second-strongest inflows among category groups, with $8.4 billion. Relative to assets, alternative funds had the strongest organic growth rate among category groups, taking in $3.8 billion;
  • The bank-loan category attracted more assets than any other category in April, leading the taxable-bond category group for the third consecutive month. Assets in the category have risen 30% for the year to date;
  • Although taxable-bond funds have led all category groups in 2013, top asset-gathering categories within the group have shifted. Inflows for intermediate-term bond, high-yield bond, and emerging-markets bond funds have slowed from levels seen in 2012, while bank-loan and nontraditional bond funds have gained ground; and
  • Within the U.S. equity category group, investors continued to prefer index funds and the value style over growth. Including exchange-traded funds, active U.S. equity funds had outflows of $5.2 billion, compared with inflows to index funds of $9.6 billion in April. 

The Morningstar report is available here. Also available are a video that recaps the March 2013 U.S. asset flow trends and more information about Morningstar Asset Flows.

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