The Markets June 3, 2008

Q1 Sees DC Flight to Safety

Defined contribution participants chased performance in the face of first-quarter volatility this year, according to Callan Defined Contribution Index data.
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Money generally flowed out of risky assets hardest hit by market volatility, such as domestic large cap, domestic small/mid cap and, emerging markets equity, and flowed into U.S. fixed income, stable value, and money market offerings, according to a Callan press release.

Callan said stable value funds were a significant DC force during the month. The average DC plan had 11.5% in stable value offerings as of March 31, up from 9.3% in the prior quarter. “In short, when the markets grow volatile, DC participants still view stable value as a safety net,” according to Lori Lucas, executive vice president and DC practice leader, Callan Associates Inc.

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The index data also showed that asset allocation funds continued pulling in market share even though their performance was undermined by market weakness during the quarter. “Positive first quarter asset allocation flows may reflect activity by plan sponsors into asset allocation funds as well as participant transfer activity,” Lucas said.

Asset allocation funds now represent about 16% of average plan assets, a cumulative increase in weighting of about 7% over the life of the Index. Target-date funds now represent about two-thirds (67%) of asset allocation funds offered by DC plans in the Index.

DC plans underperformed DB plans in the quarter, and since the inception of the Callan DC Index in early 2006, the average DC plan has underperformed the average corporate DB plan by more than 1.8% on an annualized basis. A key factor in the difference in performance is the broader investment categories enjoyed by DB plans including private equity, real estate, and absolute return strategies.

Additionally, the performance of the average corporate DB plan is shown gross of fees while the performance of the Callan DC Index is net of fees.

Finally, DC plans outperformed the average target-date 2030 fund by nearly 2% for the quarter. Lucas said the difference in returns can be largely explained by equity allocation with the Index’s total equity allocation at about 66%—a steady decline from a high of more than 70% in late 2007.

Products June 3, 2008

Pershing Adds New Fund Providers to FundVest Platform

American Funds, JennisonDryden, OppenheimerFunds, and Van Eck Global are now available on FundVest, Pershing's mutual fund platform.
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Mutual funds from these financial organizations were added to Pershing’s introducing broker/dealer customers and their investment professionals, including registered investment advisers (RIAs), according to a press release.

FundVest is a no-transaction-fee platform offering investors access to nearly 2,700 mutual funds, managed by more than 180 fund companies.

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“American Funds, JennisonDryden, Oppenheimer and Van Eck are among the most highly regarded mutual fund companies in the United States,’ said Mitchell Bell, director in the product management and development group at Pershing, a subsidiary of The Bank of New York Mellon Corporation. “The addition of these premier fund companies to our platform demonstrates our continued commitment to provide our customers with access to a wide range of market-leading solutions from high caliber financial institutions that will help them grow their businesses and assist their clients in achieving their financial goals.”


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