Separate Account, Collective Trust Assets Declined in Q209
Despite strong domestic-equity and sound fixed-income performance
during the second quarter of 2009, hefty investor assets were cashed
out of separate accounts and collective trusts entirely, according to
Morningstar data.
Morningstar’s separate account and collective investment trust database shows that $49.8 billion flowed out of separate accounts and CITs during the second quarter.
A commentary from Steve Deutsch, director of the Separate Accounts/Collective Investment Trusts and Pensions, Endowments, and Foundations Database, said that although large-cap strategies posted solid returns between March and June, they tended to underperform the other major equity asset classes. Regardless of geography (United States and Foreign) and style (growth, blend, or value), large-cap equity separate account and collective trust assets declined significantly.
Assets also flowed to long- and short-term government and corporate fixed-income strategies, with only intermediate corporate duration allocations very strongly negative or somewhat hesitant. Money market and stable-value category outflows also reflect money being put to more productive, better-yielding strategies, Deutsch said.
The data indicate that boutique money managers were the outperformance in the second quarter, as the bulk of the outflows between March and June affected the top 10 money managers ($58 billion). “Firms that are strongly committed to index-based strategies—or were swept up in the continuing reorganization of Wall Street—also showed strong asset declines during the second quarter,” the commentary said.
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Fidelity said it found that investors with a more pessimistic outlook are less likely than those with a more optimistic outlook to expect a comfortable lifestyle in retirement (61% of pessimists, 83% of optimists). They are also more likely to be concerned about risks to their retirement income, such as Social Security benefits being reduced (45% of pessimists, 33% of optimists).
Despite financial concerns, only 15% of pessimists have completed a detailed income plan to help guide their finances in retirement, compared to nearly twice as many optimists (27%), according to the survey.
“Going into the study, we anticipated that individuals with a more pessimistic outlook may be motivated by their concerns to proactively plan for retirement,” said Joan Bloom, executive vice president, Fidelity Investments Life Insurance Company. “We were surprised, however, to find the opposite—that pessimists’ concerns are not driving action that could help improve their financial situation and overall confidence levels.”
The results also show pessimists are less likely than optimists to take on risk with their investments, especially in relation to the ongoing market uncertainty. Pessimists are twice as likely as optimists (25% of pessimists, 12% of optimists) to invest with the goal of preserving money and will accept considerably lower returns, while optimists are more likely to invest with the goal of creating an equal balance of capital preservation and investing for returns (39% of optimists, 25% of pessimists).
When asked about their initial reaction to the recent market volatility, twice as many pessimists as optimists reported “feeling a sense of panic and wanting to pull out of the market” (22% of pessimists, 11% of optimists), while significantly more optimists than pessimists said their gut feeling was to “stay the course” (77% of optimists, 57% of pessimists).
However, Fidelity found that product ownership is similar among both groups for the following products:
401(k)s (88% of pessimists, 89% of optimists);
Individual Retirement Accounts (77% of pessimists, 79% of optimists);
annuities (48% of pessimists, 46% of optimists);
pensions (75% of pessimists, 71% of optimists).
When asked which account they planned to rely on most in retirement, both optimists and pessimists name their 401(k)s as the most important retirement product (15% of pessimists, 22% of optimists) followed by their personal pensions (13% of pessimists, 17% of optimists).
In addition to
showing the impact one's level of optimism or pessimism might have on
his or her own retirement planning, research from Fidelity provides
some insight into the impact it may have on a married couple's
financial preparedness.
According to Fidelity, pessimists are
less likely than optimists to report that both they and their spouse
have wills prepared (52% of pessimists, 62% of optimists). In addition,
pessimists are more likely than optimists to rely on their spouse to
know where such important papers are kept (13% of pessimists, 9% of
optimists).
Among married couples, pessimistic spouses are less
confident in their ability to assume full financial responsibility for
their joint household finances if necessary, while fewer optimists
worry about this issue (61% of pessimists, 39% of optimists).
Fidelity
said an individual's outlook might also be effecting the level of
communication with his or her partner. While the majority of both
groups reported they "always discuss important matters, such as a job
layoff, with their spouse," pessimists are less likely to do so than
their optimistic counterparts (91% of pessimists, 98% of optimists). A
larger number of pessimists also reported arguing with their spouse
about financial matters, with more than half (55%) saying they argue
occasionally or frequently, compared to 39% of optimists who say so.
"Our
research shows that in 89% of couples, one partner is generally more
optimistic than the other, and the more optimistic they are, the more
involved they are in the retirement decisionmaking process," said Bloom.
The
findings are part of an analyses of the optimism level and retirement
planning behaviors of more than 1,000 husbands and wives who
participated in Fidelity’s 2009 Couples Retirement Study (see "Couples Show Little Financial Confidence in Each Other").