The Markets February 8, 2010

Bond Funds Continue to Dominate in December

Bond funds saw inflows of $29 billion in December, according to Strategic Insight (SI), an Asset International company.
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Though SI called the monthly intake moderate compared to prior months, it still contributed to the record inflows reported for bond funds for the year (see “Bond Funds See Record Inflows in 2009”).

In contrast, U.S. equity funds saw a net outflow of $300 million in December, while international equity funds took in $8 billion. Assets in money-market funds increased $5 billion during the month, and emerging market funds garnered a net inflow of about $3 billion.

According to SI’s Monthly Fund Industry Review, among smaller-size managers of long-term funds, those that led in total long-term fund flows in December were Van Eck, Manning & Napier, Rydex Investments, International Value Advisors, Sentinel Asset Management, Transamerica Asset Management, and RidgeWorth Capital.

Among the largest firms (firms with more than $20 billion in long-term fund assets under management), those garnering the most long-term fund flows were BlackRock ($8.5 billion; the firm’s acquisition of Barclays Global Investors completed at the beginning of the month, hence this number includes flows into both traditional funds and the iShares ETFs); PIMCO / Allianz Global ($8 billion); Vanguard ($7.6 billion); JPMorgan ($3 billion); SEI ($2.3 billion); State Street Global Advisors ($2.3 billion); Franklin Templeton ($2 billion); and T. Rowe Price ($1.5 billion).

SI said ETF/ETN flow volumes reached their highest levels since December 2008, totaling $30 billion, and were propelled by S&P 500 Index, US Dollar bullish, Large-Cap (Value and Growth), Small Blend, and Utilities funds.

Information about purchasing the report is available at www.sionline.com.

Data & Research February 8, 2010

Many Sponsors Step up 401(k) Game in 2010

Less confident of their employees’ ability to sock away a sufficient retirement nest egg, mid- to large-sized companies in a new Hewitt Associates survey said they plan to step up their efforts in 2010 to help with that goal.
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A Hewitt news release said its survey found 54% are less confident about their workers’ ability to retire with sufficient assets than they were in 2009 (66%), while 18% say they are very confident about their employees’ ability to have enough retirement income to last throughout their retirement years.

As a result, 80% of companies that suspended or reduced their company match in 2009 are planning to restore it in 2010, the poll found.

In addition, employers continue to emphasize automatic 401(k) plan features. Some 46% of employers that do not already offer automatic rebalancing said they are very or somewhat likely to add it in 2010, and nearly four in 10 (38%) indicated they are very or somewhat likely to add automatic contribution escalation.

More Employer Efforts to Help Employees Save

Other results of Hewitt’s defined contribution plan poll, according to the firm, included:

  • 51% of plans offer online investment guidance, and another 42% are very or somewhat likely to do so in 2010;
  • 28% of employers offer managed accounts, and 25% indicate they are very or somewhat likely to offer managed accounts in the coming year;
  • 59% of employers offer automatic enrollment, up from 51% in 2009. Among those that do not offer the feature, more than one-quarter (27%) said they are very or somewhat likely to add it in the coming year;
  • 68% are very or somewhat likely to increase the amount of employee communication surrounding the investment fees and overall fund fees in their 401(k) plans in the coming year;
  • six in 10 are very or somewhat likely to review their plan’s governance structure, and 51% are very or somewhat likely to benchmark plan administration and procedures to best practices in 2010;
  • the number of employers offering target-date funds in 2010 (78%) remained consistent with 2009 (77%);
  • 29% of companies currently offer a Roth 401(k) to their employees, consistent with 2009. Twenty-five percent said they are very or somewhat likely to add one in 2010. 
  • 14% of employers offer annuities outside their plan as a rollover option, up from 8% in 2009. More than one-quarter (28%) are very or somewhat likely to add them in 2010.

“In the last 18 months, employees’ 401(k) accounts took a serious financial hit due to the severe market downturn. Some of them also lost the additional retirement savings that their 401(k) employer match provided,” explained Pamela Hess, Hewitt’s director of retirement research, in the news release. ”While there has been marked growth in 401(k) balances since the market recovery began, we still see too many workers not saving and investing in a way that will help them achieve their retirement goals. Employers are trying to do their part to help—which is why they are restoring their matching contributions and offering features and tools that push workers to save more throughout their working years.”

Hewitt’s study covered 162 mid- to large-sized U.S. companies representing 5.7 million employees.

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