As in the previous quarter, the DC Index bested the return of the average corporate defined benefit (DB) plan, this time by a margin of over 70 basis points. Despite the recent outperformance, since inception the DC Index trails the average corporate DB plan by nearly 1.5 percentage points.  

DC Index asset growth hit a new high water mark in the first quarter. Since inception, DC Index assets have grown 7.1% annually. However, nearly half of the annual asset growth comes not from returns, but from plan sponsor and participant contributions. Callan said this speaks to the importance of robust contributions in achieving desired DC balance levels.  

Target-date funds (TDFs) once again garnered healthy inflows, continuing a pattern since the Index’s inception. This asset class accounted for more than 40% of total inflows in the first quarter. Company stock, domestic large cap equity, and emerging markets equity funds all suffered outflows during the quarter. In a move that perhaps echoed participant sentiment regarding inflation, asset classes with perceived inflation sensitivity, such as real estate and real return/TIPS, experienced inflows. As in the previous quarter, solid inflows in small cap equity followed robust performance. Total Index turnover was below average for the quarter at 0.69%. 

During 2011, the share of equities in the overall DC Index rose to 65.5%. This is still well below the Index’s all time high of 70.5%, reached at the end of 2006. However, it is a marked increase from the low of 55% in equities seen in March 2009. Callan said the Index shows that participants tend to allow their equity allocations to drift upwards and downwards with market movements—creating a situation where they are heaviest in equities at market peaks and lightest in equities at market low points.