ICI Annual Fact Book Puts Stats to Downturn's Impact

April 27, 2009 (PLANSPONSOR.com) - That retirement plan assets collapsed in value during 2008 is not news to participants, but newly released industry data now puts a total value on the decrease: 22% to $14 trillion in 2008 over a year earlier.

That is just one statistic in an avalanche of data in the Investment Company Institute’s (ICI) latest annual Investment Company Fact Book, which offers a variety of statistics about mutual funds and other investment vehicles held inside and outside of retirement plans.   

According to the ICI, all types of retirement assets declined in value in 2008. Private-sector defined benefit (DB) plan assets fell 27%; state and local government employee retirement plan assets fell 27%; employer-sponsored defined contribution (DC) plan assets fell 22%; individual retirement accounts (IRAs) fell 24%; and annuity reserves outside of retirement plans fell 15%.

The ICI release also includes a comprehensive snapshot of retirement plan assets at year-end 2008.

Eighty-two million, or 70% of, U.S. households report that they had employer-sponsored retirement plans, IRAs, or both in May 2008. Sixty-one percent of U.S. households reported that they had assets in DC plan accounts, were receiving or expecting to receive benefits from DB plans, or both while 41% of households reported having assets in IRAs. Thirty-two percent of households had both IRAs and employer-sponsored retirement plans.

Of the $14-trillion retirement market, 2% or $3.1 trillion was in mutual funds while the remaining $10.8 trillion in assets were managed by pension funds, insurance companies, banks, and brokerage firms.

The largest components of retirement savings were IRAs and employer-sponsored DC plans, holding $3.6 trillion and $3.5 trillion, respectively, at year-end 2008, ICI said. Private-sector DB pension funds held $2 trillion in assets; state and local government employee retirement plans held $2.3 trillion in assets; and federal government DB plans and the federal employees’ Thrift Savings Plan held $1.2 trillion in assets. In addition, there were $1.4 trillion in annuity reserves outside of retirement plans at year-end 2008.

According to the ICI data, at the end of 2008, employer-sponsored DC plans held an estimated $3.5 trillion in assets. With $2.4 trillion in assets at year-end 2008, 401(k) plans held the largest share while 403(b) plans and 457 plans held another $712 billion in assets. The remaining $455 billion in DC plan assets were held by other DC plans without 401(k) features, ICI said.

Of the $3.1 trillion in mutual fund retirement assets held in IRAs, 401(k) plans, and other retirement accounts at year-end 2008, $1.8 trillion, or 57%, were invested in domestic or foreign equity funds. Domestic equity funds alone constituted about $1.4 trillion, or 44%, of mutual fund retirement assets. By comparison, about 39% of overall fund industry assets—including retirement and nonretirement accounts—were invested in domestic and foreign equity funds at year-end 2008.

At year-end 2008, approximately $837 billion, or 27%, of mutual fund retirement assets were invested in fixed-income funds (bond or money market funds). Bond funds held $415 billion, or 13%, of mutual fund retirement assets, and money market funds accounted for $422 billion, or 13%.

Assets in lifestyle and lifecycle funds totaled $340 billion at the end of 2008, down from $421 billion at year-end 2007. Lifestyle funds' assets were down 26% in 2008, declining from $238 billion to $176 billion. Assets of lifecycle funds were down 10% in 2008, decreasing from $183 billion to $164 billion. The bulk (87%) of lifecycle fund assets was held in retirement accounts, compared with 43% of lifestyle fund assets.

The ICI release also included data about investors' use of advisers. Generally, fund investors who chose to work with advisers indicated that the relationship improved their chances of growing their money and gave them peace of mind about their investments. They cited several tangible benefits of the investor/adviser relationship, expressing the common theme among survey respondents that using professional financial advisers provided a level of expertise that enhanced their investment decisionmaking.

Seventy-one percent of shareholders with ongoing advisory relationships cited the need for guidance in understanding their total financial picture, while 74% wanted help with asset allocation, ICI said. Seventy-three percent also required explanations of the wide variety of investment options and 71% wanted to make sure they were saving enough to meet their financial goals. Sixty-five percent cited making sure their estate was in order as a major reason for their advisory relationship, according to ICI.

ICI survey findings indicate that the more shareholders rely on their advisers for investment decisionmaking, the greater the value they place on the advisory relationship. For example, roughly three-quarters of shareholders who delegated or made investment decisions together with their advisers indicated that they used advisers for their financial expertise.

At year-end 2008, ICI collected data from 16,262 mutual funds, closed-end funds, exchange-traded funds, and unit investment trusts managing $10.3 trillion in assets.

The ICI data is available  here .