The Markets October 12, 2010

September 401(k) Transfers Still Tilted Towards Fixed Income

The latest data from the Aon Hewitt 401(k) Index for September indicates that asset movement slightly favored fixed income, despite the strength of equity markets during the month.
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An Aon Hewitt news release said that $54 million (0.05% of total assets) moved out of diversified equities into fixed income, excluding company stock transfers.

However, when viewed with company stock, transfers were strongly fixed income-oriented. The news release said a total of $408 million moved out of equities, with the $354 million being pulled out of company stock representing nearly three-quarters of flows for the month.

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On the other hand, GIC/stable value funds received the majority of the transfers, with $294 million shifting into this asset class.

Aon Hewitt said that in spite of an overall positive market during the third quarter, $560 million moved out of diversified equities and into fixed income investments. Including company stock, over $1.2 billion shifted out of equity funds.

The biggest loser of the quarter was company stock, with a total of $643 million transferring out of these funds (representing 4.4% of assets in this asset class), followed by large U.S. equity funds (outflows of $439 million) and small U.S. equity funds (outflows of $175 million).

GIC/stable value and bond are the asset classes with the largest inflows for the quarter. GIC/stable value funds received $587 million. Bond funds had inflows of $552 million during the third quarter, Aon Hewitt said.

(Cont...)

Transfer Volume Dips

As for the volume of transfers, September was slightly lower than the 12-month trailing average with only 0.03% of balances transferred on a net daily basis during the month and just two of the days in the month had an above-normal level of transfer activity. In total, six days of the quarter had transfer activity higher than normal, which was significantly lower than the second quarter (16 above-average days).

Participants' overall equity holdings increased significantly due to positive market movement — up 1.5% to 57.9% by the end of September. For the quarter, change in overall level was also positive, although most of the movement occurred during September. On the other hand, employee-only equity contributions decreased 0.3%, from 59.9% at the end of August to 59.6% at the end of September. For the quarter, they were down 0.7%.

The news release said during the month, the Dow Jones Industrial Average rose 7.85%, the Russell 2000 by 12.46%, and the S&P 500 by 8.92%.

Data & Research October 12, 2010

Higher Bonuses Expected on Wall Street

Fifty percent of U.S.-based financial services professionals are expecting higher bonuses for this year’s performance as compared to last year, according to a new survey.
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Higher bonuses are anticipated with greater frequency by finance professionals working at bulge-bracket banks, long-only asset managers and boutique banks, than at hedge funds, commercial banks, independent trading or research firms and professional services companies, according to a news release from eFinancialCareers, a financial services job site.

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While personal (34%) and firm performance (33%) are the leading reasons for the anticipated bonus increases, 9% of respondents indicated changing employers is the primary reason their bonus will increase more than last year.

“The signs of bonus euphoria may be hard to find, but Wall Street employers will have to deal with professionals who believe they are in contention for fatter paychecks and the inevitable retention issues should their expectations be dashed,” said Constance Melrose, Managing Director, eFinancialCareers North America, in the news release. “Recruitment activity on Wall Street is solid and talented professionals always have options particularly in compliance, risk management, technology and operations.”

The majority of Wall Street professionals (61%) indicate that money, while important, isn’t the most important reason they work in financial services.  Thirty-seven percent say compensation is the most important reason to work on Wall Street, while 2% indicate it’s not important at all.  

Results in Asia

More financial services professionals in Asia are expecting a bonus hike.  In Hong Kong, 71% of those questioned are anticipating a bigger payout, along with 69% of financial services professionals in Singapore.   Likewise, 57% of finance colleagues based in the U.K. are expecting a higher bonus.  However, Germany slightly trails the U.S., with 47% of financial services professionals anticipating a bonus increase versus last year. 

For many, the expected bonus increase will be significant. In the U.K., nearly one in five (17%) of all those surveyed believe their bonus will be over 50% higher than last year; and in Hong Kong and Singapore 14% -15% said they will be in line for an increase of over 50%. In the U.S., Germany and Australia, however, a more measured one in ten are anticipating a 50+ percent rise. 

The survey took place in the U.S., U.K., Germany, Australia, Hong Kong and Singapore between September 15-28, 2010 with 5,671 currently employed bankers and finance professionals responding.  In the U.S., 2,145 financial services professionals responded with 56% of those working in the front office, 26% in the middle office and 18% in the back office.

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