The Markets July 12, 2013

Pension Annuitization Attractiveness on the Rise

The Dietrich Pension Risk Transfer Index, which tracks the relative attractiveness of annuitizing pension liabilities, increased during June.
Reported by

The index showed the index value increased from 88.92 as of June 1, to 93.54 as of July 1. The 4.62 point gain was fueled by rising interest rates and pension funding levels. The index’s current annuity discount rate proxy of 3.07% increased nearly 70 basis points since May.

“We have witnessed many plan sponsors execute pension risk transfers over the last 60 days.” said Geoff Dietrich, vice president of Dietrich & Associates. On the heels of the Federal Reserve’s announcement that it may be pulling back the reins on its bond buying program later this year, plan sponsors who have been monitoring their cost to exit plan liabilities are being rewarded with favorable conditions for executing partial, and even full, transfers, he added. “Plan sponsors are taking action. They’re pulling their chips off the table and cashing them in.”

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The index provides a dynamically constructed, monthly directional data-point regarding the market conditions that affect settlement costs. Higher index values indicate a reduction in the settlement cost environment. The index was designed to provide pension stakeholders a mechanism for monitoring settlement market conditions, and to support effective pension plan governance and decision making.

More information about the index can be found at https://www.dietrichassociates.com.

The Markets July 11, 2013

ETF Assets Decrease During June

Exchange-traded fund (ETF) assets decreased by $59.7 billion, or 4%, in June.
Reported by

According to State Street Global Advisors’ (SSgA’s) most-recent “ETF Snapshot” report, 1,274 ETFs, with assets totaling $1.4 trillion, were managed by 39 ETF managers as of June 30.

The S& P 500 lost 1.3%, while the MSCI EAFE dropped 3.6%. Commodities were slightly positive, despite the fact that gold was down 14.5%. U.S. bonds were negative with the Barclays U.S. Treasury Index and the Barclays U.S. Aggregate Index falling 1.1% and 1.6%, respectively.

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ETF outflows topped $10 billion in June. The sector-material category had a leading $1.2 billion of inflows. The fixed income category had the most significant outflows during the month, with $6.2 billion leaving the category.

The top three managers in the U.S. ETF marketplace were BlackRock, State Street and Vanguard. Collectively, they account for approximately 82% of the U.S. listed ETF market. The top three ETFs in terms of dollar volume traded for the month were the SPDR S&P 500 [SPY], iShares Russell 2000 [IWM] and iShares MSCI Emerging Markets [EEM]. The top three ETFs in terms of assets for the month were the SPDR S&P 500 [SPY], Vanguard Emerging Markets [VWO] and iShares S&P 500 [IVV].

In terms of market performance by asset class, International Developed decreased by 3.6%, while Emerging Markets dropped 6.4%. Domestic Large Cap, Mid Cap and Small Cap markets lost 1.3%, 1.9% and 0.2%, respectively. The U.S. Aggregate, the U.S. Treasury and the U.S. Corporate Bond markets were all negative, losing 1.6%, 1.1% and 2.9%, respectively. Commodities were up 0.2%.

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