SDBA Participants "Fix-ated" In Q2

September 5, 2002 ( - Participants in self-directed accounts mirrored the motions of the market in the second quarter, shirking stocks and heading for the relative safety of fixed income investments.

According to the Schwab Self-Directed Brokerage Account (SDBA) Indicators, trading levels fell to an average of just 2.2 trades during the quarter, approximately one mutual fund trade and one stock fund trade.  While that volume represents a downtrend from the 2.8 trades a quarter earlier, trading volumes in the second quarter were in line with activity reported in the fourth quarter of 2001. 

Self-directed brokerage accounts (SDBAs) are retirement plan brokerage accounts that offer plan participants access to investments (stocks, mutual funds, fixed income securities) outside of their core holdings.

The average account positions in the SDBA accounts tracked by Schwab with more than $5,000 invested held 6.5 securities; 3.1 stocks, 2.1 mutual funds, 1.1 cash/equivalent and 0.2 fixed income securities.  The average PCRA account balance was $52,731, compared with about $56,000 at the end of 2001, and $57,234 only a quarter ago.

Bond Binge

Just over a quarter of the net asset flows tracked by Schwab went toward bond mutual funds, with another 19.24% directed toward fixed income investments.  Not surprisingly, the PIMCO Total Return bond fund continued to top the list of Top 10 mutual fund holdings, representing 3.73% of the total mutual fund assets.  Three of the top five mutual fund holdings were bond funds compared to two of the top five mutual fund holdings in the prior quarter, when bond funds and fixed income securities drew just 35% of the total.

The stock market slump continued to weigh on SDBA investors, as it did with the overall market.  Still, small cap stock funds were the third most popular target for new monies, representing 15% of the total, while information technology funds drew nearly 8%.

International mutual funds were the fifth most popular investment for new monies, attracting 7.63% of the total.

REIT “Spot”

A quarter ago, while bond funds were the most common investment for new monies, small-cap stocks were second most popular (21.8%) and large cap stock funds were next, with nearly 11%. 

Real Estate Investment Trusts (REITs) have been gaining popularity among SDBA participants as indicated by a 144% increase in net asset flows from the first quarter.  According to Schwab investors appear to be attracted to REITs due  to their high dividend income and low correlation with broader markets.

Most Popular 

Among equity holdings, Microsoft was the most popular equity holding tracked by the SDBA Indicators, representing 4.25% of the total equity assets.  Viacom was second with nearly 4%, while Cisco comprised nearly 3%.

After the PIMCO Total Return holding, Fidelity Magellan (2.34% of the total assets), PIMCO Real Return Bond (1.82%) and Janus Fund (1.63%) were next most popular.
Schwab notes that among its 11,000 SchwabPlan PCRA (Personal Choice Retirement Account) participants 61% of their assets are in the SDBA option, with the remaining 39% invested in the core options of the program.

Plan sponsors anxious about exuberance of youth might draw some comfort in knowing that the average SDBA participant is likely to be a bit older, if not more mature.  The report notes that average SDBA participant is 45, at least within the approximately 11,000 participants in the SchwabPlan PCRA platform, where Schwab serves as recordkeeper and has access to age data.