Schwab Finds Equities Dominate SDBAs in Retirement Plans

According to Charles Schwab’s institutional SDBA Indicators Report, a benchmark of retirement plan participant investment activity within self-directed brokerage accounts (SDBAs) using data from participants in the Schwab Personal Choice Retirement Account (PCRA), plan participants invested 47% of new assets into equities in the second quarter of 2015.

This compares with just 30% in the prior quarter. Flows into mutual funds dropped to approximately 10% in the second quarter, down from 38% in the first three months of the year.

SDBAs are brokerage accounts within retirement plans that participants can use to invest in stocks, bonds, exchange-traded funds, mutual funds and other securities that are not part of their plan’s core investment offerings. The average balance in PCRA was $206,564 at the end of the second quarter, representing growth of 3.8% from June 30, 2014. Participants age 50 and older remain the largest age demographic in the PCRA at 53.3%, while the average age is 49.

According to the Schwab data, mutual funds continued to be the top asset allocation at 39% of all portfolios, a decrease of 2% from last year. Allocations to equities remained the same at 28% and cash (17%), exchange-traded funds (14%) and fixed income (2%) rounded out participants’ portfolios.

Participants averaged just fewer than six trades during the second quarter, which is consistent with the low number of quarterly trades executed historically.

The data also reveals specific sector holdings within each investment category:

• Among exchange-traded funds, investors allocated the most dollars to U.S. Equity (45%) and International Equity funds (17%). Commodity funds (4%) and International Fixed Income (1%) represented the smallest allocations.
• With regard to mutual funds, Large Cap funds represented 30% of all allocations, followed by Taxable Bond (19%), International (16%), Hybrid (14%) and Small Cap funds (13%).
• Apple (AAPL) was the top overall holding, growing to 12.14% of all portfolios. As a result, Information Technology (28%) was the largest sector holding for individual securities, followed by Financials (14%) and Consumer Discretionary (12%). Utilities and Telecommunication Services represented the smallest allocation, each accounting for just 2% of participants’ portfolios.

The second quarter 2015 report, as well as prior reports, can be found at www.schwab.com/sdbaindicators.