When it comes to their own 401(k) assets, employees at Merrill Lynch & Co., Fidelity Investments and The Vanguard Group Inc. are more aggressive investors than those at other major mutual fund companies.
Merrill Lynch employees are the most daring -- with about 86% of the firm's $2.6 billion 401(k) plan invested in equities.
Fidelity's and Vanguard's 401(k) plans have 83% of their assets allocated to equities.
Fidelity has $1.4 billion in defined contribution assets; Vanguard has just over $300 million.
Neither Fidelity's nor Vanguard's 401(k) plan includes a company stock option. Merrill Lynch's does, and about 28% of participants' equity allocation is to Merrill stock.
"These shoemakers' kids do wear shoes," said Shelton S. Unger, principal in Vanguard's institutional investor group. "We get good results because employees live and breathe it."
Indeed, Pensions & Investments' informal survey of eight mutual fund companies -- Fidelity, Vanguard, Merrill, Putnam Investments Inc., Scudder Kemper Investments Inc., Dreyfus Corp., T. Rowe Price Associates Inc. and Federated Investors Inc. -- shows the mutual fund giants' own employees generally are more aggressive investors than 401(k) plan participants as a whole.
The eight mutual fund companies' own 401(k) plans have an average equity allocation of 78.61%. The typical 401(k) plan participant has about 54% in stock, according to Jeff Close, director of marketing at Spectrem Group, a Windsor, Conn., consulting firm. (All statistics include company stock.)
The average stable value/fixed-income asset allocation among participants in the mutual fund companies' plans is 12.96%, as opposed to 25% of all U.S. 401(k) assets.
Employees at T. Rowe Price had the highest allocations (30%) in stable value/fixed income; Scudder Kemper was second, with 23%. Employees at Dreyfus had the least amount -- 3.6% -- invested in that asset class.
Exposure to cash/money markets was highest at Fidelity (13%) and lowest at Scudder Kemper, where only 2% of the assets in the firm's $425 million 401(k) plan are in cash.
TRACKING THE TRENDS
Overall, asset allocations at the eight big mutual fund companies seem to track the trends in 401(k) investing, such as moving toward higher equity allocations and away from heavy stable value exposure.
In equities, for example, the lowest allocation -- Scudder Kemper's -- was still a robust 67%.
The average allocation to cash was 5.33% among the mutual fund companies. According to Spectrem Group, cash allocations by all U.S. 401(k) participants have declined to 3% of assets from 9% in 1991.
Three of the eight have a company stock option. Of those, the average allocation to employer stock was about 24%; according to Spectrem, the typical 401(k) plan has 21% in company stock.
Among the mutual fund companies, Dreyfus had the highest company stock exposure -- 43.5%. Putnam had the lowest -- 1.2%.
In terms of specific fund options, employees of the mutual fund companies are investing in most of the same mutual funds that P&I lists as being most used by defined contribution plan participants in general.
But they're not always directing their new contributions to those funds -- perhaps an indication of their market sentiment.
At Vanguard, for example, employees are investing new contributions into two funds not among those most often selected by 401(k) participants in general -- the Vanguard Balanced Index and Vanguard Index Trust Small Capitalization Stock Portfolio.
At Putnam, only about half of the mutual funds to which employees direct new money are on P&I's list; at Federated, only four of its employees' top choices also are top choices of clients.
Participation rates, meanwhile, are high at all of the mutual fund companies surveyed.
Participation ranges from a high of 93% at Vanguard to a low of 82% at Merrill Lynch.
Many executives of U.S. 401(k) plans would love to have that 82%, not to mention the 93%; average participation in U.S. 401(k) plans is around 60%.
These mutual fund companies provide investment education to their employees, but in varying amounts.
At participation leader Vanguard, employees don't get as much investment education as many nonfinancial firms provide, because Vanguard employees "get it from being in the business," said Ms. Unger.
Also, Vanguard provides a 4% employer match, Ms. Unger said, which helps boost participation.
"We call employees 'crew members,' " Ms. Unger said. "We treat crew members the same as we want them to treat our clients."
Merrill Lynch's 11-year-old 401(k) plan was revamped late last year; it increased the number of options to 62 from 27, said Denise Kleif, vice president in global benefits.
The firm then organized the options into core and noncore funds. Employees are directed to begin investing in the core first, then expand to the full menu.
About 42% of employees' investments are in the core, she said.
At T. Rowe Price, plan "communication is as important here as any other company," said spokeswoman Rowena Itchon. Only 120 of 3,200 employees are investment professionals. T. Rowe Price's 401(k) plan has $206 million in assets.
The merger of Scudder and Kemper last year resulted in a merged defined contribution plan with 54 options, said Syd Tucker, senior vice president and manager of global retirement plans.
Prior to the merger, Scudder had 34 options and Kemper had about 20, Ms. Tucker said.
Scudder Kemper has not added new investment options since the merger, but might do so in the future, she said. There is no employee match, but there is a profit-sharing contribution.
Then, there are the perks of participating in a mutual fund company's own 401(k) plan.
Putnam, for instance, sets up incubated funds and offers them to employees for a few years before launching them to clients, said spokeswoman Laura McNamara. Currently, there are seven funds being tested by participants in Putnam's $310 million 401(k) plan.