The company said each investment option in the Index is assigned an asset class and benchmark. Using its proprietary database, Callan said it can measure performance relative to benchmarks at the asset class and plan level.
A Callan news release said the index tracks the asset flows and performance of approximately 60 DC plans representing more than 800,000 participants and over $70 billion in retirement plan assets. All plans are participant-directed and include 401(k), 457 and 403(b) plans.
Additionally, the design of the Index enables Callan to differentiate between two components: investment option quality offered by plan sponsors and the timing or rebalancing decision of participants, the company said.
“The Pension Protection Act of 2006 (PPA) ushered in a new era for DC plans and with an increased focus on performance, plan sponsors and investment managers want a credible resource that gives them insight into where DC monies are invested and how participant and plan sponsor activities impact performance,” said Lori Lucas, DC practice leader at Callan Associates, in the announcement.
According to the announcement, Callan said the company has identified the following trends as a result of the PPA:
- Better diversification in DC plans due to outflows of company stock and inflows to target date funds;
- The majority of DC participant assets are invested in active investment strategies;
- A significant, growing majority of plans – 80% – offer asset allocation funds with target date funds becoming more prevalent over risk-based asset allocation options;
- Mutual funds, collective trusts and separate accounts are represented in the Callan DC Index and are mapped into twelve asset classes or styles: domestic large cap, domestic small/mid cap, stable value, international equity, company stock, domestic fixed income, asset allocation, domestic global/balanced, emerging markets equity, money market, brokerage and other.
Callan’s initial Index is comprised of second quarter 2007 data and includes results back to its January 2006 inception. More information is at www.callan.com.