Data & Research February 6, 2014

DC Investor Behaviors Steady in 2013

Most defined contribution (DC) retirement plan participants stayed the course last year with their asset allocations as stock values generally rose over the first nine months of 2013.
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According to a report from the Investment Company Institute (ICI), during the first three quarters of 2013, 9.2% of DC plan participants changed the asset allocation of their account balances and 6.8% changed the asset allocation of their contributions. These levels of reallocation activity were similar to the reallocation activity observed in the same time frame a year earlier, the ICI says.

Contribution activity was similar as well. Only 2.5% of DC plan participants stopped contributing in the first three quarters of 2013, compared with 2.1% during the first three quarters of 2012 and 2.2% during the first three quarters of 2011.

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In the first three quarters of 2013, 3.0% of DC plan participants took withdrawals, similar to the pace observed over the first three quarters of 2012. Levels of hardship withdrawal activity also remained low. Only 1.4% of DC plan participants took hardship withdrawals during the first three quarters of 2013, the same share as in the first three quarters of 2012.

However, the ICI’s data analysis did find an uptick in loan activity. At the end of September 2013, 18.3% of DC plan participants had loans outstanding, compared with 18.2% at year-end 2012 and 15.3% at year-end 2008.

To measure participant-directed changes in DC plans, the ICI has been tracking participant activity through recordkeeper surveys since 2008. This report updates results from the ICI’s survey of a cross section of recordkeeping firms representing a broad range of DC plans and covering about 24 million employer-based DC retirement plan participant accounts as of September 2013.

The ICI report is here.

Products February 6, 2014

Putnam Targets Volatility-Weary Investors

Putnam Investments is putting more emphasis on investment strategies that can help financial advisers and their clients pursue strong, risk-adjusted performance in volatile markets.
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To that end, the firm says it is re-launching its “New Ways of Thinking” campaign in 2014 to spotlight how evolving market environments should drive consideration of new types of portfolio construction. This will be accomplished, the firm says, through a series of new print and online advertisements, and through more direct marketing to investors and institutions.

Putnam says it will also use various multimedia vehicles—including social media, mobile applications and blogs—to communicate the increasing relevance of more modern portfolio construction strategies.

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Key themes of the campaign include the growth of new investment products that combine traditional, benchmark-measured investing with newer, benchmark-independent strategies that Putnam says can help clients attain global diversification and downside protection amid uncertain markets.

Additional topics addressed by the campaign will include:

  • The four primary types of risk in bond markets that most often need to be actively managed;
  • Analysis on how to apply strong fundamental research to find new and different sources of equity returns; and
  • Advice for incorporating dynamic flexibility, risk allocation, and low-volatility strategies in investment portfolios.

“Success in today’s markets calls for new thinking not just in alternative investments, but in traditional fixed-income and equity investments as well,” says Robert Reynolds, president and chief executive officer at Putnam Investments. “Conventional wisdom about portfolio-construction strategies needs to be questioned and, in many cases, revised. Investors today are looking for investment processes and structures to help them not only seek great returns, but also help curb volatility and mitigate downside risk.”

While actively seeking superior returns has always been important for their clients, Reynolds says, advisers and consultants today see the best chance of delivering such results requires thinking that goes beyond traditional style boxes. Implementing such a strategy often means investing outside benchmarks and actively allocating risks as well as assets, Reynolds says.

“These new ways of thinking, as we call them, are no longer optional or controversial,” says Reynolds, “they are essential.”

More information is available at www.putnam.com.

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