Data & Research April 8, 2008

Many Employees Want Financial Planning and Advice at Work

About half of employees want their employers to provide retirement advice and almost as many (44%, increasing from 30% last year) would like to receive access to general financial planning advice at work.
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MetLife “s latest Annual Employee Benefits Trends Study found that the workplace has become the dominant starting point for building a strong financial safety net. Growing financial concerns among employees are also creating a greater interest in advice and guidance at the workplace.

According to the study, 52% of working Americans are now getting the majority of their financial and retirement products through the workplace – up from 46% a year ago.

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“This increased employee appetite for advice at the workplace is a significant development,” said Bill Mullaney, President, MetLife Institutional Business, in the release. “It presents a tremendous opportunity for U.S. employers to optimize the real and perceived value of their benefit plans. Having a benefit program that meets the diverse needs of their employees – and communicating more frequently about benefit offerings – can result in improved employee retention, which continues to dominate employers’ minds as their top benefits objective.”

Additional study findings included:

  • Employers underestimate how important benefits are to employee loyalty; benefits are increasingly important factors in employees’ decisions to remain with their employer. Some 72% of employees said retirement benefits are an important factor in loyalty, where only 41% of employers said the same.
  • Employer focus and spending on retiree benefits is expected to increase; employees have strong interest in retirement benefits.

When asked about the importance of benefits in retention and workplace loyalty, retirement benefits and advancement opportunities tied for the third most critical factor for employees, behind salary/wages (first) and health benefits (second).

Benefits as Retention Tool

According to the news announcement, benefits are playing an increasingly important role in employees’ decisions to remain with their employer. Significantly, 45% percent of employees said benefits are an important reason why they remain at their job, up from 33% a year ago. An additional one-third (33%) indicated benefits were an important factor that attracted them to their current job, up from 28% last year.

However, the study also reveals a gap between how loyal employers believe they are to employees and employees’ perception of that loyalty. For example, 55% of surveyed employers said they feel a strong sense of loyalty to their workers, where only 41% of employees feel that their employers have a strong sense of loyalty to them.

This year 44% of surveyed employees, compared to 39% last year, said they are satisfied with their workplace benefits. Employees indicated a willingness to pay more to get more. Forty-four percent of employees indicated they are interested in their employer offering a wider array of voluntary benefits – up from 31% last year.

The study reveals that nearly three-quarters (73%) of employers that currently offer retiree benefits expect the dollar amount of these benefits to increase in the next five years, compared to 63% last year.

The research was conducted during the third quarter of 2007 and consisted of two distinct studies fielded by GfK NOP. The employee survey polled 1,380 full-time employees, age 21 and over, at companies with at least two employees. The employer survey consisted of 1,652 interviews with benefits decisionmakers at companies with a minimum of two employees.

More information is available at http://whymetlife.com/trends/index.asp.

Products April 8, 2008

Fidelity Launches Its First Long-Short Mutual Fund

Fidelity Investments has launched its first mutual fund that will engage in ‘short’ sales as well as ‘long’ investments.
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“Investors, particularly those who take a more sophisticated approach to constructing their portfolios, are expressing interest in funds that adopt institutional-like strategies for achieving attractive risk-adjusted returns,” said Sanjiv Mirchandani, president, Fidelity Personal and Workplace Investing Growth Business. “We believe Fidelity 130/30 Large Cap Fund could be a compelling large-cap equity option within a diversified portfolio.”

“Interest in long-short products also is increasing among advisers,” said Marty Willis, executive vice president, Fidelity Investments Institutional Services. “Advisers are beginning to recommend long/short solutions, particularly 130/30 structures, for their clients seeking attractive risk-adjusted returns.’

Fidelity 130/30 Large Cap Fund is available directly to investors and through advisers at banks, insurance companies and broker/-dealers via Fidelity Advisor 130/30 Large Cap Fund (classes A, T, B, C and Institutional).

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The 130/30 Strategy

“130/30” refers to the 130% of investments in the portfolio invested “long” (or bought with the expectation that the stock will outperform the market) and the 30% of investments in the portfolio held “short” (or those borrowed and sold with the expectation that they will underperform). The added 30% of long exposure comes from investing the proceeds of short sales. The goal of a 130/30 strategy is to provide 100% market exposure (beta = 1), but with a better risk-adjusted return than other strategies that target the same benchmark.

Fidelity 130/30 Large Cap Fund will be managed by Keith Quinton, a seven-year Fidelity veteran and the manager of Fidelity Disciplined Equity Fund, Fidelity Tax Managed Stock Fund and Fidelity Advisor Tax Managed Stock Fund. He has nearly 25-years of investment management experience including specific expertise in quantitative analysis.

According to a press release, Quinton will use a combination of Fidelity’s fundamental research and fundamentally based quantitative models to select long and short investment ideas. From this integrated investment process, the portfolio will measure its performance against the S&P 500 while maintaining market-capitalization and style exposures similar to that of the index. According to Fidelity, selling securities short may help manage the fund’s overall risk profile, but can also introduce some unique risks.

Fidelity says that the fund will have the typical risks associated with equity investing and some risks that are specific to the 130/30 approach such as the complexity of managing short sales and the potentially larger losses from short sales compared to long positions. In addition, the fund will have expenses not typically associated with mutual funds such as interest and dividend expenses on short positions.

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