LARGEST PLANS ASSETS INCREASE A SLIGHT 2.2 %: UNEXCITING DOMESTIC AND OVERSEAS MARKETS THE PRIMARY CULPRIT
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • H.I.G. raises $1.4 billion for latest credit fund
      James Zelter
      Private credit managers supersizing their loans
      Deborah Pederson and David J. Rothenberg
      Arena hires 3 to boost global marketing of private credit strategies
      BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
    • Kieran Mistry
      Hymans Robertson picks head for new non-traditional risk transfer unit
      Troy Saharic
      NEPC brings on director of new business development
      Bill Foley
      Foley-backed SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
    • An American flag flies at the U.S. Capitol in Washington on March 6, 2021
      House expected to pass COVID-19 relief bill with multiemployer aid
      watch video
      5:39
      The coronavirus pandemic: One year later
      Gary Paulin
      Outsourced trading becoming side effect of virus for managers
      Logistics becomes shining star of investing during virus crisis
    • Michael Madowitz
      Taking a workforce break to raise children hurts retirement savings – economist
      David Blanchett
      Morningstar says women build better DC plans
      Morningstar turns detective to find gender from 5500s
      Desktop with document showing pie chart with investment types along with a calculator
      OECD proposes revision of its DC ‘good design’ roadmap
    • Tool gives investors insight into companies' alignment with U.N. goals
      Preqin: Alts industry showing some progress on gender equality
      The tower of Stockholm City Hall rise above the city's skyline on Aug. 6, 2020
      Swedish funds managing $250 billion get slammed for ESG record
      Vapor rises from a petrochemical plant
      New York State Common inks more climate pacts
    • University of Washington/University of Minnesota
      Parametric creates quantitative fellowships for diverse students
      Roger Ferguson
      Finance museum honors TIAA's Roger Ferguson
      ERISA attorneys are taken to task by federal judge
      Springboard illustration
      LGPS Central execs to mentor U.K. students
    • Robert 'Rob' Shafir listens during a Senate Permanent Subcommittee on Investigations hearing in Washington on Feb. 26, 2014
      Sculptor hedge fund hits sixth straight year of outflows
      The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the GameStop logo on a smartphone in an arranged photo.
      GameStop frenzy has hedge fund managers rethinking next moves
      Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management, speaks during the Sohn Investment Conference in New York on May 6, 2019
      Citadel, Point72 back Melvin with $2.75 billion after losses
      Shanghai skyline
      Global hedge funds struggle even in a more open China market
    • Washington Community Foundation picks SEI as outsourced CIO
      Tool gives investors insight into companies' alignment with U.N. goals
      Dallas-Fort Worth Airport lands $23 million in 3 alts funds
      A logo outside the Greensill Bank offices in Bremen, Germany, on March 3, 2021
      Greensill files for U.K. administration after swift unraveling
    • A J.P. Morgan is displayed on a door in New York on April 14, 2009
      JPMAM lights up Project Spark to invest in diverse alts managers
      Marc Rowan, co-founder of Apollo Global Management, speaks at the annual Milken Institute Global Conference in Beverly Hills, Calif., on April 29, 2014
      Apollo-Athene merger billed as ‘natural progression’
      Andrew Morrison
      Janus Henderson chooses global head of client experience
      Jim Wiant
      Denmark’s Capital Four picks CEO to establish U.S. presence
    • NISA Pension Surplus Risk index inches up in February
      CalSTRS adds alts investments to ESG-themed portfolio
      District of Columbia Retirement Board executive director to retire
      Police car in the city of San Antonio
      San Antonio fund terminates Lazard from emerging markets strategy
    • Andrew Morrison
      Janus Henderson chooses global head of client experience
      Jim Wiant
      Denmark’s Capital Four picks CEO to establish U.S. presence
      Edwina Ho
      Cambridge Associates selects senior director for new Hong Kong office
      District of Columbia Retirement Board executive director to retire
    • The Charging Bull statue is covered in snow near the New York Stock Exchange on Feb. 11, 2021
      Bain: Private equity managers finish 2020 strong
      Carlyle secures $4.1 billion ESG-related credit facility
      Hamilton Lane raises $3.9 billion for fifth secondary fund
      PSG closes first Europe-focused fund at $1.5 billion
    • AEW chooses head of fund operations and debt finance
      Sebastiano Ferrante and Jocelyn de Verdelon
      PGIM Real Estate turns to staff to fill new roles
      European managers key in on specialist strategies
      Ingrid Jacobs
      Jones Lang LaSalle brings on head of diversity and inclusion
    • Jackie Walorski
      Contribution catch-up for caregivers gaining favor
      Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
    • COVID-19: One year in
      Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
      P&I 1,000 largest retirement plans: 2021
      Retirement in emerging markets
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Washington Community Foundation picks SEI as outsourced CIO
      PennPSERs puts $375 million into 2 alts funds
      Dallas-Fort Worth Airport lands $23 million in 3 alts funds
      Enerpac Tool taps Fidelity as record keeper for 401(k) plan
    • Washington Community Foundation picks SEI as outsourced CIO
      PennPSERs puts $375 million into 2 alts funds
      Dallas-Fort Worth Airport lands $23 million in 3 alts funds
      Enerpac Tool taps Fidelity as record keeper for 401(k) plan
    • Emerging Markets Debt Mandate
      Emerging Markets Equity Mandate
      Investment Consultant
      Independent Investment Consulting Services
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Vaccination cartoon
      Rallying to meet the ongoing COVID-19 challenge
      Tesla cartoon
      Don’t confuse wealth creation with retirement saving
      Top 1000 cartoon
      Top 1,000 retirement plans weather storm just fine
      Infrastructure cartoon
      You must go big on infrastructure, Mr. President
    • Investment Trends: Looking Ahead Across Equity Sectors
      Rethinking Market and Reference Data Management
      China is embarking on a new stage of growth
      Gold Outlook 2021
    • Sameer Shalaby
      Commentary: Why should investors care about treasury management?
      David Blitzstein
      Commentary: Without a national retirement policy, Americans face a future of pension crises
      Lawrence Cunningham
      Commentary: Gensler should keep Clayton’s pragmatic proxy adviser rules
      My-Linh Ngo
      Commentary: Pension funds and the role of the debt market in the fight against climate change
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      Emerging Markets: Expanding Investors' View
      P&I Content Solutions
      How will gold react?
      To people shaking hands
      P&I Content Solutions
      Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
      Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      5:39
      The coronavirus pandemic: One year later
      watch video
      0:45
      Private funds weathered 2020 turmoil
      watch video
      0:59
      Secure choice and other retirement plans at a state level
      watch video
      3:33
      P&I 1,000 by the numbers 2021
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      ESG Capabilities and Climate Impact Investing
      Looking Beneath the Headlines – and Below Investment Grade – for Alpha Potential
    • POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
      POLL: The Biden administration’s economic plans
      POLL: Retirement issues in 2021
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Tradewatch for Q4 2020
      Graphic: Is it time for DC plans to embrace private equity?
      By the Numbers for February 2021
      Top Performing Managers of Managed Domestic Broad-Market Fixed Income, 4th Quarter 2020
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      ESG Capabilities and Climate Impact Investing
      Looking Beneath the Headlines – and Below Investment Grade – for Alpha Potential
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. Print
January 23, 1995 12:00 AM

LARGEST PLANS ASSETS INCREASE A SLIGHT 2.2 %: UNEXCITING DOMESTIC AND OVERSEAS MARKETS THE PRIMARY CULPRIT

Christine Philip
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Assets of the 1,000 largest U.S. employee benefit plans grew only modestly during the year ended Sept. 30, climbing 2.2% to $2.725 trillion in a year of relatively flat and negative returns in domestic and overseas markets.

    Defined contribution plans among Pensions & Investments' survey of the 1,000 largest employee benefit plans grew 7.7% in the 12 months, to $657 billion. Defined benefit plan assets of the top 1,000 grew just 1.6% to $2.054 trillion. In the previous year's survey, defined benefit plan assets rose 11.6%, compared with 6.7% for defined contribution plans, reflecting double-digit domestic and international market returns.

    After adjusting for market-related growth, defined benefit assets held by the 1,000 largest employee benefit plans grew a tiny 0.38%, while assets of defined contribution plans rose 6.2%. The top 200 pension funds - which account for more than 75% of the total assets of the 1,000 largest funds - rose just 1.8% to $2.07 trillion. After adjusting for market growth, assets of the top 200 defined benefit plans rose 0.75%; assets held by defined contribution plans in the top 200 grew 4.3% on a market-adjusted basis.

    Indexes used as benchmarks for the performance of domestic equity and fixed-income markets explain much of the reasons for this year's only modest growth.

    The Standard & Poor's 500 Stock Index grew only 3.69% in the 12 months ended Sept. 30. The Salomon Broad Bond Index returned -3.2% for the same period. By comparison, the S&P 500 returned 13% for the year ended Sept. 30, 1993; the Salomon Broad index return was 10.17%.

    Consultants attribute the flat, market-adjusted growth of defined benefit plans to poor domestic market performance.

    Defined contribution plans in the top 200 and top 1,000 rankings are beginning to show the benefits of the increasing sophistication in the way such plans are administered by sponsors and in the investment savvy of the individual plan participants making asset allocations in their retirement accounts, said Mark E. Ahern, senior consultant at SEI Capital Resources, Wayne, Pa.

    "The institutionalization of the defined contribution plan market has improved performance with better managers, with more treasury department input into investment choices for the plan, and a move away from one-stop shops. Plans are offering the best funds in the various and increasingly sophisticated asset classes they are now offering, rather than funds from a single family that might have mixed performance levels," Mr. Ahern said.

    "Employees in the top 200 are likely to have had more educational training from their employers and, hence, more diversified asset allocations. And the larger employers may also be offering more lucrative matching contributions," said Mr. Ahern.

    The comparatively stellar performance of the international equity markets has continued to attract both defined benefit and defined contribution plan assets.

    International assets of the top 200 employee benefit plans grew 30.6% in the year ended Sept. 30, rising to $187.2 billion. International assets now represent 9% of the total assets of the top 200 plans.

    The Morgan Stanley Capital International Europe Australasia Far East Index returned 10.12% for the year ended Sept. 30. The Salomon World Bond Index, however, fell 2.59% for the same period (See related story on page 23).

    Defined benefit plan assets of the top 200 funds invested in international equities rose 32.7% to $130.8 billion, compared with $98.6 billion a year earlier. On a market-adjusted basis, top 200 international equity assets grew 20.6%.

    One reason for the growth in international equity is defined contribution plans, whose investments in foreign stocks grew 34% to $18.1 billion in the year ended Sept. 30. On a market-adjusted basis, international equity assets held by the top 200 defined contribution plans grew 21.7%.

    Consultants say the surge in active international management may account for the drop in domestic passive equity and fixed-income investment by the top 200 defined benefit plans.

    "Plan sponsors understand that domestic indexing is a useful tool and the prices are good, with razor-thin fees," said SEI's Mr. Ahern. "But as plan sponsors move to international investing, the overwhelming majority select active international management. Funding for international investment is following a general trend that moves assets from indexed domestic asset classes to active international asset classes."

    The Arizona State Retirement System in Phoenix, for example, reduced its domestic indexed equity assets 64% and domestic indexed fixed-income assets by 56%, and increased its international equity investments 41%.

    Indexed assets fell 4.8% for the combined top 200 defined benefit and defined contribution plans to $390.9 billion from $410.8 billion in 1993. Top 200 defined benefit plans reduced their indexed equity assets 5.5% to $250 billion, an 8.9% drop on a market-adjusted basis. Large defined benefit plans dropped indexed fixed income even further, with a 13.8% drop to $76.8 billion, or a market-adjusted drop of 11%.

    Defined contribution plans, on the other hand, increased indexed assets.

    Defined contribution plans within the 200 largest employee benefit plans invested $60.2 billion in indexed equities as of Sept. 30, a 10.5% increase. On a market-adjusted basis, top 200 defined contribution indexed equity assets grew 6.5%. Indexed bond funds experienced huge asset growth among top 200 defined contribution plan investors, albeit from a small base. Indexed bonds among that group grew 44.4% to $3.9 billion or 47.3% on a market-adjusted basis.

    "I think we're seeing the beginning of a trend here," said Mr. Ahern. "As defined contribution plans get bigger and more professionally run, they begin to look more like defined benefit plans, and hence, indexing will play a larger role. DC plan sponsors have been less likely to offer indexed options to plan participants than defined benefit plan counterparts, but that is changing."

    The dissolving of the investment management departments of several large defined benefit plan sponsors in 1993 and 1994 contributed to a decline in the amount of assets managed in-house.

    Among the largest 200 plans, internally managed defined benefit assets dropped 2.3% to $647.1 billion, from $662.6 million. Equity internal management by the top 200 defined benefit plans rose 6%, as fixed income managed in-house dropped 3.7%.

    "It makes sense that the pools of internally managed assets are fewer and smaller. For different reasons, big plan sponsors are looking very hard at their internal management activities. There have been huge cost pressures on managers for core, plain vanilla management and sponsors have been the winners. The need to internally manage assets to save money over outside manager fees is diminishing," said Mr. Ahern.

    Monica Butler, client executive in the U.S. consulting group of Frank Russell Trust Co., Tacoma, Wash., noted the reduction or elimination of just a few of the very large internal investment management departments was enough to affect the overall amount of assets managed in-house. IBM Corp., Caterpillar Inc., Sears, Roebuck and Co. and Shell Oil Co. all eliminated or significantly reduced internal management activities (P&I, Sept. 19).

    In addition, American Telephone & Telegraph Co., Connecticut Trust Funds, Evangelical Lutheran Church in America Board of Pensions, Florida State Board of Administration, ITT Corp., Los Angeles Fire & Police Pension System, New York City Teachers Retirement System and Pacific Telesis Group all reduced their internally managed assets, according to their data for the P&I survey.

    Several alternative investment classes showed decline, primarily because of what SEI's Mr. Ahern said was a move "back to the basics."

    "Plan sponsors are examining alternative investments, driven by their board of trustees, who in turn have been concerned about the problems at places like Orange County. Consultants have been seeing sponsors work to remove all the smoke and mirrors to get back to asset classes in which there is a more symmetrical risk-return pattern," he said.

    "Plan sponsors are beginning to look at their alternative investments very carefully and are moving to avoid investments where enormously risky downside potential simply isn't justified by relatively incremental, minor upside potential. Potential upside reward is being balanced back to downside risk much more carefully than in past years."

    For example, assets in mortgage-backed securities among the top 200 employee benefit plans dropped 5.8%. Mortgage investments dipped 25.3% for top 200 plan sponsors overall.

    Other highlights of the survey data collected as of Sept. 30 include:

    Real estate equity assets rose 4% for top 200 defined benefit plan sponsors to $49 billion. Frank Russell's Ms. Butler said because real estate performance in 1994 was closer than it has been to other asset classes, plan sponsors are beginning to consider a move back up to their target portfolio allocations.

    GIC and BIC investments grew 3.9% for the top 200 funds to $53.1 billion. Growth in defined contribution plan assets invested in GICs was minor at 1%, suggesting plan participants might be diversifying their accounts into other investment choices.

    Overall, defined benefit plan and defined contribution plan contributions by the top 200 funds rose 8.7% to $50 billion, up from $46 billion the previous year. Defined benefit plan contributions rose to $40.6 billion, a 10% increase from the previous survey's $36.9 billion. Defined contribution plan employers in the top 200 increased 3.3% to $9.4 billion the contributions made to plans. As of Sept. 30, 1993, defined contribution plan sponsors contributed $9.1 billion.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Citadel's Ken Griffin gives $125 million to Chicago museum; name will change
    Gender diversity is improving on FTSE 350 boards
    Gender diversity is improving on FTSE 350 boards
    Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    Sponsored Content: Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Rethinking Market and Reference Data Management
    Investment Trends: Looking Ahead Across Equity Sectors
    China is embarking on a new stage of growth
    Gold Outlook 2021
    Shifting DC Times - Winter 2021
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center