The Markets May 9, 2007

Retirement Assets Continue Growth in 2006

Retirement assets reached $16.4 trillion at the end of 2006, with lifecycle and lifestyle continuing their popularity, but lifecycle funds gathered a larger percentage of retirement plan assets.
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The increase in assets was propelled largely by an increase in individual retirement accounts (IRAs) and DC plans, which comprised 12% of the advance, according to the Investment Company Institute’s annual survey of the retirement market.

At the end of 2006, according to ICI’s 2007 Investment Company Fact Book $1.5 trillion of 401(k) plan assets were invested in mutual funds, with mutual funds’ share of the 401(k) market increasing from 9% in 1990 to an estimated 55% year-end 2006, ICI said.

Lifestyle and lifecycle funds, generally included in the hybrid fund category, have continued to grow in popularity, ICI said, with about $303 billion was invested in lifestyle and lifecycle funds at the end of 2006. Lifestyle funds were more popular, with $189 billion of assets while lifecycle funds held $114 billion. However, lifecycle funds were more popular in retirement plans: the bulk (90%) of lifecycle fund assets was held in retirement accounts, compared with about 47% of lifestyle fund assets, ICI said.

Asset Allocations
ICI found that the asset allocations of 401(k) participants varies with age, with younger participants tending to allocate a larger portion of their account balances to equity securities (which include equity mutual funds and other pooled equity investments and the company stock of the employer). Older participants are more likely to invest in fixed-income securities such as money funds, bond funds, and guaranteed investment contracts (GICs) and other stable value funds.

Individuals in their twenties invested 62% of their assets in equity securities, 20% in fixed-income securities and 16% in balanced funds, while those in their 60s invested 49% of their assets in equity securities, 39% in fixed-income securities, and 10% in balanced funds, ICI said.

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IRAs

The Fact Book found that assets in IRAs rose 17% to $4.2 trillion in 2006, with nearly half of those assets invested in mutual funds and DC plan assets totaled $4.1 trillion.

The mutual fund industry’s share of the IRA market has increased from 22% in 1990 to 47% at year-end 2006, with mutual fund assets held in IRAs reaching $2 trillion.

Mutual funds were most widely held in IRAs. As of mid-2006, approximately 34.8 million U.S. households owned traditional IRAs, or those that meet guidelines of the Employee Retirement Income Security Act (ERISA), while about 14.4 million U.S. households owned Roth IRAs.

According to ICI, 61% of IRA assets were invested in stock funds, 30% in bond funds and 25% in hybrid funds.

For the full ICI mutual fund report visit http://www.icifactbook.org/.

Products May 9, 2007

John Hancock Expands Managers for Variable Annuities

John Hancock Annuities has added three new asset allocation options from American Funds and Franklin Templeton to John Hancock Trust (JHT), the firm’s variable annuity investment platform.
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The three new asset allocation options are:

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  • Franklin Templeton Founding Allocation, a fund of funds which invests equally in three underlying funds: Global (invests in stocks around the world, including those in the U.S. and emerging markets); Income (invests in both equity and debt securities, focusing on dividend-paying stocks and undervalued bonds); Mutual Shares (invests in undervalued stocks as well as risk arbitrage securities and distressed companies).

  • American Asset Allocation, which invests directly in American Funds Insurance Series (“AFIS”) Asset Allocation Fund. The AFIS fund is managed with a similar investment objective as American Funds American Balanced Fund, investing between 40 – 80% of assets in stocks and between 20 – 50% of assets in bonds, including up to 15% in foreign stocks and up to 5% in foreign bonds.

  • American Funds Global Diversification, a model portfolio consisting of five funds: 50% American Global Growth, 10% American High Income, 5% American New World, 15% American Global Small Cap, and 20% American Bond. Each of these five funds invests directly in funds of the same name managed by AFIS.

The change was effective May 1.

“John Hancock is focused on bringing premier asset management capabilities to the platforms that underlie our variable annuities. We also have long been proponents of a balanced, disciplined investment strategy through the use of asset allocation funds, including our own Lifestyle series of portfolios, which we have offered since 1996,” said Marc Costantini, President, John Hancock Annuities.

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