Nearly 5% of money flowed out of stable value funds in 2009, compared to inflows of nearly 17% in 2008, Callan said. In the fourth quarter, money continued to flow into most equity funds and out of capital preservation vehicles such as stable-value and money-market funds. However, the pace of turnover for the quarter declined to 0.57% (below the historical average).
Target date funds were a major recipient of inflows during the fourth quarter, and have seen inflows every quarter since the Index’s inception—including throughout the market collapse, Callan noted.
Target date funds account for more than 10% of DC assets and are represented in 75% of DC plans. For plans with target-date funds, target-date assets average 19% of the total.
Stable-value funds account for 16% of assets, down from more than 18% going into 2009. However, despite positive flows and the market rally, the Index’s equity exposure has not returned to pre-market collapse levels. The average plan has about 63% in equities, down from a high of 70.5% in December 2007.
The average DC plan rose 22.22% in 2009, helping to offset the 28.5% decline in 2008, according to Callan.
The index’s recent strong performance means that DC participants are in the black for the first time since the third quarter of 2008. Going into 2009, the value of DC Index assets had shrunk by 2.16% on an annualized basis since inception, despite an annualized contribution rate by plan sponsors and participants of 3.06% during that same period, according to Callan. By the end of 2009, balances of participants in the Index experienced a growth rate of 4.34%.
However, Callan said much of this increase (3.33%) comes from contributions, with only 1% attributable to actual total return.
The Callan DC Index is available here.