The Markets May 10, 2012

Positive First-Quarter Returns for U.S. Master Trust Universe

The median return of BNY Mellon’s U.S. Master Trust Universe was 7.12% for the first quarter of 2012. 
Reported by

This marked the second consecutive quarter of positive returns.  For the 12 months ending March 31, 2012, the median plan was up 4.33%.

“Building on 2011’s strong finish, all segments of the Universe posted appreciable returns for Q1, with public plans leading the way at 7.70%, followed by foundations which trailed by less than half a percent,” said John Houser, vice president and manager of performance and risk analytics for BNY Mellon. “For the 12-month period, corporate pension plans far outpaced other segments with a return of 6.01%, getting a boost from their relative overweighting of U.S. fixed-income holdings.”

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Other highlights include:

•  Nearly 99% of plans had positive results for the first quarter. For the 12-month period, 96% of plans were in the black.

•  Forty-two percent of plans matched or outperformed the custom policy return of 7.53% for the first quarter.  For the full year, 24% of plans outperformed the custom policy.

•  Public plans were the leading plan type for the first quarter with a median return of 7.70%, followed by foundations, Taft-Hartley, corporate pensions, health care and endowment plans.

•  U.S. equities were the dominant asset class for the quarter with a median return of 12.95%, vs. the Russell 3000 Index return of 12.87%.  Non-U.S. equities posted a median return of 11.97%, ahead of the Russell Developed ex-U.S. Large Cap Index result of 10.76%.  U.S. fixed income had a median return of 1.36%, vs. the Barclays Capital U.S. Aggregate Bond Index return of 0.30%.  Non-U.S. fixed income posted a median return of 3.40%, compared with the Citigroup Non-U.S. World Government Bond Index return of -0.22%. 

The average asset allocation in the BNY Mellon U.S. Master Trust Universe for the first quarter was: U.S. equity 29%, U.S. fixed income 27%, non-U.S. equity 16%, non-U.S. fixed income 2%, real estate 2%, cash 2% and alternatives/other 22%.

With a market value of $2.29 trillion and an average plan size of $3.19 billion, the BNY Mellon U.S. Master Trust Universe is a fund-level tracking service that can be used to make peer comparisons of both performance and asset-allocation results.  The Universe consists of 719 corporate, foundation, endowment, public, Taft-Hartley and health care plans.

 

 

Data & Research May 10, 2012

Retirees Provide Insight for Retirement Planning Success

Advisers and plan participants can learn from the experiences of current retirees.
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More than 90% of participants polled in BlackRock’s fourth annual retirement survey agreed they have something to learn from retirees (the majority of those polled were ages 60 to 69) about the choices they made in planning for retirement.  

“ ‘Successful’ retirees saved the maximum amount of money permitted by their respective 401(k) plans, they estimated their retirement income and planned for future income needs,” Chip Castille, managing director and head of BlackRock’s U.S. and Canada Defined Contribution Group, told PLANADVISER. “Participants should look at how these retirees were engaged with their 401(k) plan and how they made the most of it.”

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The lessons learned by retirees include four main retirement planning regrets: not making the most of the 401(k) plan (13% of retirees reported doing so, and of those, 87% expressed regret); not enrolling in a retirement plan early enough (23% of retirees reported doing so, and of those, 90% expressed regret); not making a financial plan for saving for retirement early enough in their working life (27% of retirees reported doing so, and of those, 85% expressed regret); and not saving the maximum amount of money (27% of retirees reported doing so, and of those, 78% expressed regret).

According to the survey, 75% of retirees said they saved the maximum amount of money permitted by their 401(k) plan, versus 42% of participants who said they are saving the maximum.

 

(Cont...)

Despite regrets, current retirees feel secure about their life in retirement. In fact, 94% of respondents feel optimistic about their life in retirement, 91% feel that their financial risk in retirement is under control and 91% feel that their financial future is secure.

Survey respondents reported that increased tenure and engagement with DC plans increases confidence for retirees and current participants. Retirees’ experience of retirement seems to be more positive than the expectations of current plan participants. More than half of retirees are confident they will have enough money to live comfortably in retirement, compared with a quarter of plan participants.

Castille said he thinks a few apparent and less-apparent factors play into why retirees’ experience seems more positive than participants’ expectations. “There [are] the obvious answers of secure income from traditional pensions and a more pessimistic view on the part of participants that social security will be there for them—but putting that aside for a moment, we believe part of it has to do with passing through phases of life,” he said.

Participants begin to maximize more options of a plan as they pass through life stages, Castille explained. They also have a more realistic view of their own savings and preparation as their retirement date draws near. “No one knows what retirement will be like until they’re actually there, so it’s natural to fear what we don’t know,” he added.

BlackRock Inc., in partnership with Boston Research Group, conducted three separate online surveys of 1,035 retirees, 1,002 participants and 118 plan sponsors in March 2012.

 

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