Active International Equity Portfolios Outpace MSCI EAFE Index

Two-thirds of active international equity portfolios outperformed the MSCI EAFE Index return of 10.7% for the first six months of 2007, according to consultant InterSec Research.

The median portfolio in InterSec’s EAFE Plus universe averaged a 5.8% exposure to the emerging markets and posted a 17.3% return year to date ending June. Over the last three years, 65% of portfolios in the peer group outperformed the MSCI EAFE Index return of 22.2%, according to InterSec.

The median growth fund was the frontrunner in the InterSec EAFE Plus universe, returning 11.9% year to date versus 11.3% for core and 10.8% for value.

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The median value portfolio return of 10.8% beat the EAFE index by just 10 bps, while outperforming the EAFE Value index by 1.3%. Over the long term, value funds have outperformed growth as the median five-year value portfolio returned 19.9% compared to 17.7% for growth.

The median active manager of emerging markets equities delivered an absolute return of 15.1% for the second quarter, but barely exceeded the MSCI Emerging Markets Index by just 10 basis points.

For the year to date, the median fund return of 18.2% surpassed the benchmark by 60 basis points, mostly due to superior stock selection in China and Russia, according to the research.

For the three year period ending June, the median fund posted a 40.6% return versus the 38.2% for the benchmark. Most managers added value through superior stock selection in Taiwan, and good market allocation throughout Asia and Latin America.

Great-West Continues Buying in RK Space

Great-West Life&Annuity Insurance Co. (GWLA) has agreed to acquire Franklin Templeton Investment’s 401(k) recordkeeping business, the firms announced.

The deal will mean that Great-West will assume additional servicing and custodial responsibilities for approximately 340 plans, representing about 64,000 participants. Great-West has already been supporting Franklin Templeton’s recordkeeping business since 2006 through its affiliate FASCore, LLC.

“This agreement reinforces our position as one of the top retirement plan providers in the United States,’ said Raymond McFeetors, president and CEO of Great-West Lifeco, in a release. “It demonstrates our commitment to the corporate retirement plan marketplace, where we’ve earned a reputation as an innovative and growing player.’

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The transaction is expected to close in the fourth quarter of 2007.

In total, GWLA provides retirement plan services to 21,000 401(k), 401(a), 403(b), and 457 plans, representing approximately 3.5 million participants and $104 billion in assets.

In early February, Great-West announced it would be acquiring Putnam Investments from Marsh & McLennan (See It’s Official – Great-West Picks Up Putnam). That acquisition followed the 2006 acquisition of the 401(k) retirement plan business of U.S. Bank and MetLife.

A press release about the Franklin Templeton deal is available at http://www.greatwestlifeco.com/english/news/lifeco_08_01_2007_templeton.pdf.

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