Investing June 17, 2014

DC Participants Traded Lightly In May

June 17, 2014 (PLANSPONSOR.com) – Defined contribution (DC) plan participants bucked the stock market adage of “sell in May and stay away,” continuing recent trends with a light trading month in May, says Aon Hewitt’s 401(k) Index.
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The average daily transfer volume was 0.024% of balances, identical to April’s value and well below historical levels, finds the index. May also marked the seventh consecutive month that trading activity was below 0.03%. Typically, the average monthly trading activity has been close to 0.05% since Aon Hewitt began tracking this data in 1997. Total transfer activity across the index was $396 million (0.25%) with one day in May with above normal activity.

Aon Hewitt defines a normal level of relative transfer activity as when the net daily movement of participants’ balances, as a percent of total 401(k) balances within the index, equals between 0.3 times and 1.5 times the average daily net activity of the preceding 12 months.

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The index also shows that when trading occurred, DC participants favored fixed-income funds for 62% of trading days in May, which is down from 67% in April. Overall, net transfer activity moved away from diversified equities (equity assets excluding company stock) by $62 million (0.04%).

Bond funds received the most inflows in May with $151 million (38%), followed by international funds with gains of $88 million (22%), and premixed funds with $75 million (19%). Most equity-based asset classes had net outflows in May. Leading the way, small U.S. equity funds lost $159 million (40%), followed by company stock $105 million (27%), and mid-U.S. equity funds $81 million (21%) transferring out.

On average, participants’ overall equity allocation for May remained the same as April at 65.4%. Employee contributions to equities remained unchanged as well at 66.6%.

The global equity markets continued their upward trend during the month of May. They were led by the emerging equity markets as the MSCI Emerging Markets Index gained 3.5% during the month. U.S. equities, as measured by the S&P 500, returned 2.3% while non-U.S. Equities, as measured by the MSCI All Country World ex-U.S. Index, returned 2.0%. The Barclays U.S. Aggregate Index posted its second positive month in a row, returning 1.1% during May as the 10-year Treasury yield decreased to 2.48%.

Products June 17, 2014

Morningstar Launches Manager Research Services

June 17, 2014 (PLANSPONSOR.com) – Investment research firm Morningstar, Inc. has launched a service to help institutional investors evaluate funds, investment strategies and asset management firms.
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Morningstar Manager Research Services combines the firm’s fund research reports, ratings, software, tools and proprietary data with access to Morningstar’s manager research analysts. The service complements internal due diligence functions for institutions such as banks, wealth managers, insurers, sovereign wealth funds, pensions, endowments and foundations.

“We’ve provided analyst access on the equity research side of the house for several years, and firms began asking to talk to our manager research analyst team as well,” explains Kunal Kapoor, head of global information products and client solutions for Morningstar, based in Chicago. “To better represent the breadth and depth of their expertise, we’ve also changed the name of the analyst team from fund research to manager research. Globally, we have more than 110 manager research analysts in 15 markets. They do more than rate and cover funds. They also specialize in analyzing the managers and firms that are running the funds.”

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Kapoor adds, “Having direct access to our manager research analysts can help institutions with their research due diligence, an important part of the process of selecting investments and creating portfolios that deliver better outcomes for investors.”

Features of Morningstar Manager Research Services include:

  • Comprehensive insights from manager research analysts, with access by phone, email, or in person.
  • Research reports for up to 4,000 funds globally including active, passive, multi-asset, exchange-traded and closed-end fund strategies produced by more than 110 manager research analysts globally.
  • Morningstar Analyst Rating for funds, which represents Morningstar analysts’ conviction in the fund’s ability to outperform on a risk-adjusted basis over the long term and is expressed as gold, silver, bronze, neutral or negative. Analysts arrive at a rating through an evaluation of five key pillars—people, process, parent, performance and price.
  • Morningstar Stewardship Grade for approximately 35 fund firms in the United States and Canada. Firms receive a grade, from A to F, to help investors identify companies that do a good or poor job of aligning interests with their fund shareholders. The grade evaluates corporate culture, manager incentives, fees and regulatory history, along with board quality for U.S. firms.
  • Morningstar Rating for more than 35,000 funds globally, which is a quantitative, risk-adjusted measure of a fund’s past performance and expressed as one to five stars.
  • Research studies, white papers and perspective about relevant issues, investment themes, asset class trends and industry events. 
  • Screening, monitoring and portfolio attribution tools.
  • An expansive data universe that encompasses approximately 160,200 open-end mutual funds; 10,700 exchange-traded funds; 7,400 closed-end funds; and 10,700 separate accounts and collective investment trusts.

Morningstar delivers Manager Research Services in concert with Morningstar Direct, its institutional global research platform. The price varies based on the level of analyst access and customization, and access to Morningstar’s analysts varies based on the client’s jurisdiction.

More information can be found here.

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