Returns Modest, Activity High for DC Plans in 3Q07

December 12, 2007 ( - The Callan DC Index for the third quarter of 2007 found returns were modest, flow activity was relatively high, and growth of asset allocation fund assets continued to increase within defined contribution plans.

According to a Callan Associates news release, the performance of the typical DC plan was 1.63% for the quarter – underperforming relevant benchmarks, including the average corporate defined benefit plan (1.93%) and the typical 2030 target-date fund (1.92%). Active investment management reduced DC plan returns by five basis points within the quarter, while flow activity timing added two basis points, Callan said.

The Callan data showed 1.22% of Index assets shifted during the third quarter of 2007, compared to 0.49% of assets shifting during the second quarter. Balanced funds pulled in 5.5% of assets and asset allocation funds attracted 4.7% of account balances.

The 21% asset outflow from real estate funds was likely due to the subprime mortgage problems, Callan said. Large cap equities also experience an outflow of 1.8%.

However, domestic large cap equities continued to hold the highest percentage of Index assets at 28.7%. Asset allocation funds continued to grow, holding 13.6% of assets at the end of quarter three, up from 9% since the Index was begun.

Target-date funds comprise 59% of the total share of asset allocation funds, while 41% of balances in asset allocation funds were in target-risk lifecycle funds.

The Callan DC Index tracks the quarterly asset flows and performance of approximately 65 DC plans representing more than 800,000 plan participants and more than $70 billion in assets.