Data & Research February 23, 2011

MassMutual Finds Gender Split in Asset Allocation Fund Choice

While men and women participants are turning to asset allocation funds in similar amounts, women are showing a discernable preference for target-date offerings. 
Reported by

MassMutual’s Retirement Services Division has released data for the fourth quarter 2010 indicating that female participants in retirement plans administered by MassMutual have been shifting an increasing percentage of their retirement savings into asset allocation investments in general (target-date or risked-based options), but are favoring target-date options.

MassMutual’s Retirement Services Division notes that at year-end 2010, women participants recordkept by the firm had 24.3% of their retirement assets in asset allocation options vs. men with 24.0%. Significantly, the data shows that among female investors, average balances in target-date investments are approximately double those of risk-based options, while among men, the split is roughly even between target-date and risk-based options.

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MassMutual said that two possible explanations for the phenomena are that:

  • women have recognized the need for better diversification and
  • historically, men have demonstrated more aggressive investment behavior than women.

MassMutual’s data supports the conventional wisdom that men prefer risk-based investment selections and exhibit a preference for having more control over their investments. In a recent survey of participants in retirement plans administered by MassMutual, 53.1% of female participants prefer to spend as little time as possible on making investment decisions compared to 35.1% for men. Likewise, 25.9% of women are confident in making their own investment decisions compared to 44.1% for men.

MassMutual also noted that balances for women continue to trail men by approximately 40% and their deferral percentages continue to trail those of men by 0.5 percentage points. On a positive note, balances for women gained 5.7% on average for the quarter, compared to 5.5% for men, which MassMutual said also may be explained by their different approaches to investing.

The percentage of participants who stopped or decreased their deferrals during the quarter (3.8%) was at its lowest level since the beginning of the market decline, while the number of participant loans, hardship withdrawals, and call center activities declined slightly as well.

“MassMutual has invested significant resources in participant education and, in fact, participant visits to self-service education modules increased by 6% during the fourth quarter vs. the third quarter 2010, and are up 21% for the year,” says Elaine Sarsynski, executive vice president of MassMutual’s Retirement Services Division and chairman and CEO of MassMutual International LLC. 

The average participant balance in retirement plans administered by MassMutual now exceeds the average balance from year-end 2007 when the market decline began. MassMutual’s data also shows the highest percentage growth in average account balances for the year was experienced by participants in their 40s (10.4%) and 50s (9.8%). Among all participants, retirement assets invested in stable value (24.9%) as a percentage of total assets are now at their lowest level since the start of the recession, according to the provider.

MassMutual serves approximately 1.2 million participants.

Products February 23, 2011

Invesco to Launch Senior Loan Portfolio ETF

Invesco PowerShares Capital Management LLC plans to launch what it said was the first exchange-traded fund (ETF) to provide access to a portfolio of senior secured bank or floating rate loans.

 

Reported by

According to a press release, the PowerShares Senior Loan Portfolio is anticipated to begin trading March 3, 2011, on the NYSE Arca under the ticker symbol BKLN. The PowerShares Senior Loan Portfolio is the first ETF that provides investors access to a portfolio of senior secured bank or floating rate loans. The fund is expected to issue monthly dividends. 

“Senior loans can provide an attractive income stream for yield-minded advisors and investors interested in shortening portfolio duration,” said Ben Fulton, Invesco PowerShares managing director of global ETFs, in announcing the launch.  “As a result of shorter maturities and a floating interest rate feature that typically resets quarterly, senior secured loans have the ability to keep pace with rate changes and have historically proven to be more stable than traditional high yield fixed-income investments”. 

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Senior loans – also called leveraged loans, syndicated loans, bank loans or floating rate loans – are privately arranged corporate debt instruments that provide capital to a company and are syndicated to a group of banks and institutional lenders. According to the announcement, the loans are typically secured by specific assets of the borrower such as property, plant, or equipment and are senior to all other outstanding debt obligations. Proceeds are often used to finance leveraged buyouts, mergers, acquisitions, stock repurchases and other transactions. 

The PowerShares Senior Loan Portfolio (ticker: BKLN) is based on the S&P/LSTA U.S. Leveraged Loan 100 Index. The Underlying Index is designed to track the market-weighted performance of the largest institutional leveraged loans based on market weightings, spreads and interest payments. The fund will normally invest at least 80% of its total assets in the securities that comprise the Underlying Index.

The index consists of 100 loan facilities drawn from a larger benchmark – the S&P/LSTA Leveraged Loan Index which covers more than 1,100 facilities. According to the announcement, loans eligible for inclusion in the index must be U.S. dollar denominated, senior secured first lien, with a minimum initial term of one year, and a minimum initial spread of 125 basis points over LIBOR at the time of issuance. The underlying index which is compiled, maintained and calculated by Standard & Poor’s is rebalanced semi-annually and reviewed for deletions on a weekly basis.

More information is available at http://www.invescopowershares.com.

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