Asset Movements Slow in Q2

August 26, 2008 ( - There was a dramatic decline in the amount of activity within the Callan DC Index in the second quarter of 2008.

According to an announcement, just 0.07% of monies moved between asset classes, either due to plan sponsor or participant activity, compared with the first quarter’s tally of 1.05%.   This lower level of activity corresponded to a reduction in losses in the second quarter, according to Callan, whose DC Index posted a 1.58% loss in Q2, much better than the loss of 6.51% in Q1 (see  Q108 Sees DC Flight to Safety ).  

Stock Activity

What activity there was focused almost entirely on company stock, a category that saw outflows equal to 0.7% of company stock balances, according to Callan.   These outflows corresponded to very weak performance by the company stock funds in the Index during the quarter – a sign that participants were not totally immune to poor performance, according to the announcement.   For the quarter, company stock within the plans of the DC Index lost nearly 11%.

The Index continued its pattern of trailing the typical Corporate DB plan. The latter lost just under 1% in the second quarter, or 61 basis points less than the typical DC plan.   However, Callan noted that this reflects, in part, the fact that DB plan performance is gross of fees, while DC plan performance is net of fees. However, individual company stock performance was clearly a material factor in relative underperformance by DC plans.  

The results also show that average DC participant would have been better off in the average Target Date 2030 fund in the second quarter than in the average DC plan.

Overall growth of the Index since inception (January 2006) comes in at an annualized rate of just over 7% – and almost half of this growth (3.5%) owes to participant and plan sponsor contributions. Growth from total returns accounts for just 3.7% of the total.   Callan said this was bad news for those depending on the power of compounding to grow their DC plan assets.