Investing November 15, 2004

Q3 SDBA Activity Down

November 15, 2004 (PLANSPONSOR.com) - Third quarter self-directed brokerage account (SDBA) activity remained static, with investors maintaining their exposure to equities, mutual funds, money markets and fixed income from July until September.
Reported by

Mutual funds accounted for 48% of asset flows in the third quarter, according to Charles Schwab’s ‘SDBA Indicators’ report. This was up nearly 5% from the previous quarter. Equity asset flows were down 7% from the  second quarter , accounting for 32% of asset movement.

In a press release, Schwab analysts asserted that although trading was static, investors seemed to be getting less conservative in their investment choices, indicated by an increased investment in mutual funds and steady investments in money markets.

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The number of trades per account fell in the third quarter, with the average account trading 2.42 times. This was down 1% from the second quarter. There was, however, a large differentiation between accounts over $250,000 and those under, with larger account trading much more (4.98 times) than their smaller counterparts (2.2 times). Large accounts were more active in equity trading in the third quarter, while smaller accounts tended to be driven by mutual fund trading, according to the news release.

Large accounts, not surprisingly, have on average more holdings (16.85) than their smaller counterparts (5.85). The average age of the holder is older, and their exposure to equities, mutual funds, and fixed-income vehicles are all larger as a percentage of their holdings when compared to smaller accounts. Smaller accounts tend to hold a larger percentage of their assets in cash and other equivalent holdings, according to Schwab. While the average SDBA balance was $95,146 in the third quarter, the average account size for all accounts valued over $250,000 was an impressive $565,742.

The SDBA report, released by Charles Schwab Corporate Services, profiles the investor behavior of the holders of the company’s self-directed brokerage accounts foe employer-sponsored retirement plans, the Schwab Personal Choice Retirement Account.

Administration November 12, 2004

S&P: Pension Obligations Outpace Assets in '03

December 23, 2003 (PLANSPONSOR.com) - The Standard & Poor's 500 pension underfunding level grew to a record $259 billion in 2003, as a year-long bull market did little for pension funding levels.
Reported by

Pension asset levels in the S&P 500 companies increased mightily in 2003, riding the 25% increase of the S&P 500, to a total of $1,063 billion from $951 billion a year-end 2002.   However, increasing even more were pension obligations, which soared to a year-end projection of   $1,323 billion, up $160 billion from the 2002 close of $1,163 billion, according to data supplied by Standard & Poor’s.

Additionally, the funding status to market value remained nearly unchanged this year at -2.58% from -2.62% in 2002.   By comparison, at the very apex of the bull market in 1999, S&P 500 funds were over funded, with the surplus representing 2.30% of total market value.  

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Even though the pension shortfall continues to widen, S&P equity market analyst Howard Silverblatt ensures investors the companies on the whole have enough processed, either on hand or in their investments, to meet current pension obligations.   Investors should still keep on eye on the situation though, since, Silverblatt cautions,   “Investors need to assess the full obligations of a company, where the required funds will come from and how any shift in expenditures will affect future growth.”

To aide investors in their quest for knowledge, the Financial Accounting Standards Board (FASB) has just released a revised rule number 132, requiring companies to disclose asset allocations, investment strategies, and contributions.   Starting next June, companies will also have to report future benefit payments.  

“Investors need to familiarize themselves with these values and tables, and understand what these figures mean for company growth,” Silverblatt said.

To further assist pension fund watchers, S&P complied a chart comparing this year’s pension funding status with previous years.

STANDARD & POOR’S QUANTITATIVE SERVICES

S&P 500 HISTORICAL SUMMARY PENSION DATA

(Values in $ Billions unless otherwise noted)

YEAR

PENSION

PROJECTED

PENSION

PENSION

PENSION

FUND

END

ASSETS

BENEFIT

FUND

STATUS

OBLIGATIONS

STATUS

 

 

OBLIGATIONS

STATUS

% OF

% OF

% OF

 

 

 

 

GAAP

S&P 500

S&P 500

 

 

 

 

INCOME

MARKET

MARKET

 

 

 

 

 

VALUE

VALUE

 

 

 

 

 

 

 

2003 Est.

1,063

1,323

-259

-60.38%

13.17%

-2.58%

2002

951

1,163

-212

-83.50%

14.35%

-2.62%

2001

1,089

1,090

-1

-0.54%

10.42%

-0.01%

2000

1,239

1,015

224

50.38%

8.67%

1.91%

1999

1,278

995

283

70.15%

8.08%

2.30%

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