DC Returns Down, But Outpace Major Equity Indexes in Q3

December 4, 2002 (PLANSPONSOR.com) - Defined contribution plan investments took it on the chin in the third quarter, but overall fared much better than major US market indexes, according to a new analysis.

The best returns for the quarter were found in the self-directed brokerage account segment of the Security Trust Company (STC) Quarterly Defined Contribution Investment Returns Index, which reported an average loss of 5.81% for the quarter, somewhat better than the 6.34% loss from the prior quarter (see SDA, Core Returns Suffer in Q2 ).  

Separately managed options lost 7.54%, while selections among core mutual fund investment options lost 8.78%, on average, according to the STC index, which tracks the performance of nearly 1500 defined contribution plans, representing $7.2 billion in assets and an estimated 540,000 participants.

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Those results compared favorably with the 17.24% loss registered by the S&P 500, as well as the 17.39% loss for the Dow, and the near 20% tumble for the NASDAQ.

Bond “Yields”

Within the STC Index itself, bond funds and money market/stable value funds were the only categories to show positive returns for both the quarter and year-to-date.   For the quarter bond investments in the STC Index notched a 2.84% gain, while money market/stable value funds eked out a 0.84% gain.   Year to date bonds in the STC Index are up 4.04%, while money market/stable value offerings are up 2.55%.

Perhaps as a result of the performance disparity, STC experienced a 10% increase of funds into money market and stable value funds in the third quarter, while large cap growth funds suffered a 25% decrease.

Ticker “Tape”

Year to date, self-directed brokerage accounts in the STC Index have registered an average annualized loss of 10.60%, compared with a loss of 11.95% for separately managed options, and a 15.20% decline for the returns in core option mutual funds.   For the same period, the S&P 500 was down more than 28%.

Security Trust Company is the nation’s largest independent trust and custody company, providing institutional back-office trust services to financial service providers and their customers.   The Phoenix-based company was founded in 1991.