Data & Research March 3, 2009

CRR: Federal Reserve Report Doesn't Account for Financial Crisis

The release of the Federal Reserve’s 2007 Survey of Consumer Finances (SCF) came too late to provide an accurate picture of the 401(k) plan landscape.
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That is the contention in a new issue brief from researchers at the Center for Retirement Research (CRR) at Boston College. Considering that enactment of the Pension Protection Act of 2006 was supposed to make participating and investing in 401(k) plans easier, release of the 2007 SCF seemed like a great opportunity to reassess 401(k)s; however, “the 2007 SCF reflects a world that no longer exists,” researchers note.

The 2007 SCF shows 401(k) and IRA balances of $78,000 for those approaching retirement–a modest improvement over 2004, according to researchers Alicia H. Munnell, Francesca Golub-Sass, and Dan Muldoon. The progress was due in part to slightly higher participation rates, improved diversification, and fewer withdrawals and loans, according to the report.

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However, the researchers note that by October 2008, the stock market collapse had reduced 401(k) and IRA balances by about 30%–to just $56,000. In addition, hardship withdrawals–while still at low levels–have ticked up, the report says.

The report authors also point out that recent announcements show more companies have begun cutting their employer match, which will slow 401(k) growth. The CRR has compiled a table of companiesthat have announced 401(k) match contribution suspensions.

“An Update on 401(k) Plans: Insights From the 2007 SCF” can be downloaded here.

Deals & People March 3, 2009

Mercer Makes Domestic Equities, Fixed Income Appointments

Manny Weiss is joining Mercer as a portfolio manager for domestic equity strategies and Wilson Berglund is joining Mercer as a senior analyst in fixed income, the company announced.
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In its announcement, Mercer said the two key appointments to its U.S. operations were made “in order to support significant growth.” According to Rich Nuzum, President and Global Head of Mercer investment management: “During 2008 we added more than 45 new institutional defined benefit clients with initial funding exceeding $3.8 billion as well as a significant number of defined contribution and retail clients.”

Weiss will be responsible for Mercer’s Large Cap Value and Growth, Core Passive, and SMID Cap Growth and Value strategies. He will also be responsible for domestic equity manager research and analysis as well as recommending manager and strategy allocation changes within domestic equity strategies, the announcement said.

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Prior to joining Mercer, Weiss was an institutional portfolio manager at a hedge fund boutique, 2100 Capital, where he supported a range of products, from fund of hedge funds to multi-strategy hedge funds and individual strategy hedge funds, and also served as a member of the investment team. Previously, he was a managing director of Putnam Investment’s Core Growth equity team.

Berglund’s primary focus will include constructing and monitoring asset allocation for fixed income offerings, evaluating sub-advisers, and working with institutional investors to create customized solutions within a liability driven investment (LDI) framework. Prior to joining Mercer, Berglund was with Putnam Investments, most recently as a senior vice president, and portfolio manager in the Core Fixed Income team responsible for customized fixed income strategies for Insurance clients. Previously, he served as a senior product manager for Putnam Fixed Income.

Both Weiss and Berglund will be based in Boston.

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