Northern Trust said the Tracker will analyze data from 85 retirement plans in the United States with daily valuation, representing approximately 1.5 million participants and $190 billion in market value, a subset of the total DC assets managed or serviced by the company.
As an example of its capabilities, the Tracker showed that in 2012, participants lightened up on U.S. equity investments even as the Russell 3000 Index of U.S. stocks gained 16.4% for the year. U.S equities remained the largest asset class at 31.1% of holdings, but fixed income saw inflows of 9.2% for the year despite lower yields, as DC investors looked for safe havens from volatility and uncertainty in the equity markets.
“Our tracker information, combined with market performance data, reinforces why it is important that DC participants stay the course to meet their long-term investment goals,” said Jim Danaher, managing director of Defined Contribution Solutions at Northern Trust. “At the same time, we can see that more DC investors are participating in positive trends such as reducing their ‘home country bias’ by diversifying into international equities, and increasing allocations to target retirement date funds.”
Target retirement date funds dominated asset inflows in the DC plans tracked by Northern Trust, growing from 11.9% to 14.6% of participant allocations during 2012. International equity grew from 5.9% to 7.6% of allocations in the Tracker universe.
“As the preferred qualified default investment of most DC plans, target retirement date funds have benefited from the increased adoption of auto-enrollment and other automated features, and we anticipate participant outcomes will show potential improvement through the use of these professionally managed investment solutions,” said Susan Czochara, senior product manager in Defined Contribution Solutions. “Investors are also taking advantage of the expanding investment universe through exposure to broader international equity benchmarks that incorporate the full ex-U.S. global equity opportunity set, further diversifying their sources of risk and return.”
The Defined Contribution Tracker will be published annually using year-end data aggregated from DC retirement plans with daily valued assets under custody at Northern Trust. More information about the Tracker can be found at www.northerntrust.com.