Data & Research November 28, 2011

Higher Ed Employees not Well Prepared for Retirement

Fidelity’s Education Generational Survey found nearly half (49%) of the higher education workers surveyed describe themselves as "conservative" investors when it comes to retirement, regardless of age.
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Younger employees were found to be using the same asset allocation strategies as their older counterparts, with Gen Y using a similar asset mix (50% stock, 35% bond/annuity and 15% cash) as Gen X and Baby Boomers. In addition, more than half (55%) of all higher education employees surveyed say they consider themselves to be “beginners” at investing — including seven in 10 Gen Y (71%), half (50%) of Gen X and half (51%) of Baby Boomers. 

“Time until retirement is one of the biggest factors that should be considered when determining asset allocation,” said John Ragnoni, executive vice president, Fidelity Tax-Exempt business. “While we recognize many investors are feeling cautious in these uncertain markets, the asset mix of a participant with decades until retirement should look very different from that of someone who is on the verge of tapping into his or her retirement savings.”  

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When it comes to tools and resources used to learn about retirement savings, the survey shows Baby Boomers rely mostly on guidance from financial professionals (42%) and employer-provided education materials (37%). In contrast, Gen X relies primarily on educational materials from employers (37%) and online websites (36%) and Gen Y relies more on friends and family (54%) and online planning tools (41%).  

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More than six in 10 (63%) respondents in Fidelity’s Education Generational Survey said they are concerned they will not be able to live comfortably in retirement.   

When asked to describe their personal plan for retirement, less than a quarter (24%) indicated they had a formal plan in place. Even among Baby Boomers, only 27% said they had a formal plan.  Forty-six percent of respondents said they will delay retirement or never retire at all. The likelihood of delaying retirement was even greater among faculty, with more than half (54%) indicating they will delay retirement or never retire. This trend was even higher among older faculty, with 68% saying the same.   

"Having a personal plan for retirement is more important than ever," said Ragnoni. "This is especially true among boomers closest to retirement. Fidelity has helped millions of Americans transition from saving for retirement to creating a paycheck in retirement. For employers, helping employees prepare for retirement is essential to faculty and staff renewal."   

The survey of approximately 600 higher education employees assessed retirement saving and investing behavior across three generations, Generation Y (ages 21-32), Generation X (ages 33-46) and Baby Boomers (ages 47-65).

The Markets November 28, 2011

Majority of Alternatives Managers Remain Optimistic

Sixty-three percent of investment managers surveyed by SEI at its annual CFO Forum for Alternative Investment Managers are optimistic about their firm’s prospects over the next three years. 
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Of the 63%, half (50%) said they feel this way due to the strength of their brand. The poll also found that respondents felt the institutional channel offered the greatest opportunity for asset growth (74%), specifically naming pension plans and foundations and endowments as the most attractive segment.

An SEI Quick Poll in August found 78% of pension executives say their plans have an alternatives allocation, a steady increase from 53% in 2009 and 65% in 2010. However, SEI’s poll also found fewer plans allocating more than 10% of their portfolio to alternatives—42% of those with more than $300 million in assets, compared with 77% in 2010 (see “Running the Fund: Considering the Alternatives“). 

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Geopolitical and economic uncertainties were seen as the most significant challenges facing the industry in the next 12-18 months, cited by 63% of the CFOs, COOs and other senior executives included in the survey. However, a majority of managers said investor confidence is better now than in the immediate aftermath of the financial crisis, albeit only slightly. 

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Participating firms indicated that the top areas for investment in the next 18 months would be portfolio management (25%) or marketing and distribution (25%) functions, while only 4% are planning to invest in investor reporting. Almost 80% of managers feel the cost of adhering to new regulatory requirements will negatively affect their firm's profitability, yet they were split 50% to 44% as to whether the volume and appropriateness of new regulations was about right or far too burdensome.

Forty-seven percent of managers cited increasing efficiency as their greatest operational challenge, followed by their ability to reduce costs.

"Managers are looking to improve their scalability, increase their efficiency, and streamline internal processes," said Ross Ellis, vice president and head of the SEI Knowledge Partnership for SEI’s Investment Manager Services division. "CFOs and COOs wear many hats, and through the increased use of technology and leveraging of third-party resources, they are better able to focus on what's most important while keeping abreast of heightened regulatory requirements."

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