The Markets May 13, 2015

April Another Light Trading Month for DC Accounts

April was another light trading month for participants in defined contribution (DC) plans, the Aon Hewitt 401(k) Index reveals.
Reported by

On average, 0.026% of 401(k) account balances transferred each day and just three days experienced above-normal trading activity for the month, Aon Hewitt says. When participants made trades they preferred fixed income over equities on about two-thirds of trading days (14 out of 21).

The most popular asset classes for inflows were international ($133 million), GIC/stable value ($65 million) and bond funds ($59 million). The most prevalent classes for outflows were large U.S. equity ($207 million), company stock ($58 million) and money market funds ($34 million).

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Target-date funds continued to receive the majority of new contributions into individuals’ accounts, at $394 million, while large U.S. equity funds saw contributions of $211 million.

The monthly results shows participants’ overall allocation to equities inched up from 66.3% to 66.4% in April, after combining contributions, trades, and market activity. Future contributions to equities decreased slightly from 67.4% at the beginning of April to 67.2% at the end of the month, Aon Hewitt says.

Turning to capital market returns, they were mixed during April 2015. Large cap U.S. equities represented by the S&P 500 Index delivered positive returns—as did international equities represented by the MSCI ACWI ex-U.S. Index. At the same time, U.S. small cap equities (represented by the Russell 2000 Index) and U.S. fixed income (represented by the Barclays Aggregate Index) both fell during the month.

Most defined contribution plan participants had also been content to stay put with their investments in March, following a more volatile start to the year.

Data & Research May 13, 2015

Managed Accounts the Next DC Investment Trend?

The number of mega plans offering managed accounts has grown 13 percentage points in the last year.
Reported by

Mega plan sponsors are pushing the envelope yet again, going beyond target-date funds by offering more personalization to their plan participants through managed account vehicles, according to the DC Investment Manager Brandscape, a Cogent Reports study by Market Strategies International.

Cogent Reports notes that actions by mega plans often serve as indicators of new industry trends. The proportion of mega plans offering these customized allocation solutions as their 401(k) plan default investment option has increased from 5% in 2014 to 18% in 2015.

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

According to the study, mega plans, defined as those managing $500 million or more in assets, report a strong interest in offering exchange-traded funds (ETFs) within managed accounts to their plan participants as a means of offering a cost-effective solution. Furthermore, these sponsors are significantly more likely to cite retirement income product offerings as a key reason for selecting a managed account provider.

“While target-date funds continue to serve as the most widely preferred default investment option among most plans, this increased usage of managed accounts among Mega plans signals a growing desire in the industry to offer a more personalized solution for plan participants,” says Linda York, vice president of Cogent Reports.

The report identifies the top investment managers that plan sponsors would likely consider for managed accounts and target-date funds as well as other investment products. Among the larger plan segments, eight firms rank in the top ten for both managed accounts and target-date funds.

Study results are based upon 600 web-based surveys among a statistically representative sampling of investment decision-makers within 401(k) plan sponsors. Information about how to purchase the report is here.

«