SDA, Core Returns Suffer in Q2

September 4, 2002 ( - The market's downdraft treated both self-directed account investors and those in core options equally badly in the second quarter, according to new data.

The Security Trust Company (STC) Quarterly Defined Contribution Investment Returns Index found that individually directed brokerage account returns averaged a negative 6.34%, compared with a loss of 6.79% for core options.  Separately managed accounts fared better, losing 5.57%, on average for the quarter.

Not surprisingly, among core mutual fund options tracked by STC, only bond funds and money market/stable value options managed positive returns, 1.35% and 0.86%, respectively.

That was a disappointing turnaround from the first quarter of 2002, where the aggregate return for individually directed broker accounts was 1.55%, compared with 1.16% for separately managed offerings.

Some Comfort?
Still, retirement plan investors could take comfort from the fact that during the same period the NASDAQ suffered a 20.14% loss, and the Dow stumbled 13.14%.  However, the S&P 500 – a common component offering in many 401(k) programs – was down just 4.21%. 

Year-to-date core option mutual funds tracked by STC are down 6.42%, compared with losses of 4.79% in individually directed brokerage offerings and 4.41% in separately managed accounts.

The average individually directed account balance tracked by STC was $150,000, while the average managed account balance was $6,500,000.

The STC Index is a quarterly analysis of investment returns on selected participant-directed defined contribution plans for which STC provides trustee and custodial services.  The sample for the first-quarter index consists of 1,063 plans serviced by STC totaling approximately $7.2 billion in assets and covering an estimated 465,000 participants.  The 1,063 plans include 2,490 IDAs and 167 separately managed accounts. 

Phoenix, Arizona-based Security Trust Company provides institutional back-office trust services for financial service providers – including brokers, investment advisors, money managers, and record-keepers/TPAs – and their customers.