Benefits August 11, 2009

Retirement Assets Equal One-Third of U.S. Household Assets

August 11, 2009 (PLANSPONSOR.com) - Americans held $13.4 trillion in retirement assets at the end of the first quarter of 2009, accounting for 33% of all household financial assets in the United States, according to a new report from the Investment Company Institute (ICI).
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The U.S. Retirement Market, First Quarter 2009 indicates that between December 31, 2008, and March 31, 2009, retirement assets fell 4.4%, from $14.1 trillion to $13.4 trillion. ICI said that during the first quarter, total return on equities was -11%, while bonds returned 0.2%, according to Standard & Poor’s 500 stock index and the Citigroup Broad Investment Grade Bond Index.

Nearly two-thirds of retirement assets were held in employer-sponsored plans at year-end 2008, and 46% of assets held in IRAs were rollovers from employer-sponsored plans, ICI said. At the end of the first quarter, IRAs held $3.4 trillion of retirement market assets; and another $3.4 trillion was held in employer-sponsored DC plans, of which $2.3 trillion was held in 401(k) plans.

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Forty-four percent of IRA assets and 45% of DC plan assets were invested in mutual funds. Of the $1.53 trillion in DC plan assets that were held in mutual funds in the first quarter, $855 billion was held in equities.

ICI data shows lifecycle, or target-date, mutual funds managed $159 billion at the end of the first quarter, compared with $164 billion at the end of the fourth quarter of 2008. Almost 90% of assets in lifecycle mutual funds were held in retirement accounts.

While some might speculate that new focus on 403(b) plans brought on by new IRS regulations would mean a shift from investments in insurance products to mutual funds, Investment Company Institute data shows differently.

The U.S. Retirement Market, First Quarter 2009 indicates that insurance companies held 57% of 403(b) plan assets at the end of first quarter 2009, compared to 55% at the end of 2008. Variable annuity mutual funds held 24% of 403(b) plan assets, down from 25%, and non-variable annuity mutual funds held 20%, same as at year-end 2008.

According to the ICI data, $243 billion of 403(b) assets were in mutual funds at the end of the first quarter, compared to $261 billion at the end of 2008. However, 403(b) assets in other investments also declined to $318 billion at the end of first quarter from $320 billion at the end of last year.

The down market was definitely at play in the declines: out of $243 billion in 403(b) assets held in mutual funds, $158 billion was invested in equities.

The report shows similar findings for 457 plan assets. At the end of first quarter 2009, $48 billion of 457 plan assets were in mutual funds, while $87 billion were in other investments. This compares to $51 billion and $89 billion, respectively, at the end of 2008. Of $48 billion in 457 plan assets held in mutual funds, $29 billion was invested in equities.

The ICI report is here .

Products August 10, 2009

Ameriprise Launches Active Diversified Alternatives

August 10, 2009 (PLANSPONSOR.com) - Ameriprise Financial has introduced Active Diversified Alternatives Portfolios, a series of professionally managed portfolios designed for long-term investors seeking increased diversification and risk management.
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Fund manager research and portfolio construction from Wilshire Funds Management is designed to enhance the offerings’ risk-adjusted performance by incorporating uncorrelated sources of return from funds that utilize alternative investment strategies, according to a news release.

An approach using six alternative investment trading strategies within a discretionary wrap account allows financial advisers to make recommendations from among six risk profiles and two tax treatments (tax-sensitive and tax-neutral), based on investors’ goals, risk tolerance, tax situation, resources and specific needs, the announcement said.

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The risk profiles include conservative, moderate conservative, moderate, moderate aggressive, aggressive, and all equity. The corresponding alternative strategies are managed futures, global tactical asset allocation, equity market neutral, long/short equity, merger arbitrage, and convertible arbitrage.

The allocation to alternative strategies varies based on the risk profile selected. In general, each portfolio will have an allocation to alternatives ranging from 8%-20% of the portfolio.

“As individual investors work with their financial advisers to define risk tolerance, they are increasingly focused on managing risk over the long term,” said Sarah McKenzie, Senior Vice President of Brokerage and Managed Products at Ameriprise Financial, in the news release. “Active Diversified Alternatives Portfolios seeks to provide investors with consistency, diversification and risk management through a sophisticated investment process that is easy to use.”

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