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Ahead of the Curve covers developments that may impact the behavior and portfolio positioning of institutional investors. Take a closer look at events in the ever-changing regulatory, legislative and investment markets to determine how they may impact you. |
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The number of 401(k) plan sponsors offering participants target-date investment funds has doubled during the past four years, while the use of risk-based funds has waned, a recent survey found.
The “2008 401(k) Benchmarking Survey” was conducted by Deloitte LLP, the International Foundation of Employee Benefit Plans and the International Society of Certified Employee Benefit Specialists. The survey found 57% of the 436 plan sponsors surveyed offered target-date investment options, up from 28% in 2004. Another 10% of respondents said they were considering adding such a fund in the future.
Conversely, only 20% of this year’s respondents offered a lifestyle option, down from 31% in the previous 2005/2006 edition of the survey.
According to the survey, one reason for the surge in target-date funds could be the ability of plan participants to delegate asset allocation and rebalancing decisions to fund professionals.
Overall, the survey found employers continue to try to leverage their investments in 401(k) plans to attract, motivate and retain employees. Other key findings from this year’s survey include: - 42% of respondents use
auto-enrollment, up from 23% from the previous 2005/2006
survey. Another 26% of the respondents were considering an
auto-enrollment feature.
- About two-thirds (68%) of the plans offering auto-enrollment used a default contribution rate of 3%, compared with about half (53%) in the previous survey. Only 16% used a default percentage of 2% or less, compared with 26% in the 2005/2006 survey.
For a copy of the complete survey report, go to deloitte.com. |
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Northern Trust has created a “FAS 157 Toolkit” that combines automated processing, detailed reporting and industry expertise to help institutional clients affected by the new accounting standard.
“We used the toolkit approach because we feel that by providing an extensive library of resources to our clients, we can offer more comprehensive solutions for every aspect of FAS 157 implementation,” says Debra Clayton, client reporting product manager for Northern Trust. “We wanted to give clients the information needed to not only assist them in preparing their disclosures, but also to document their valuation policies and procedures.”
The toolkit includes asset level pricing details, extensive documentation of pricing methodologies, customization of level determinations and thought leadership on the challenges facing the industry related to FAS 157.
Northern Trust recently hosted a forum as part of its commitment to help clients navigate FAS 157. The forum consisted of service providers and industry experts discussing how the industry is adjusting to the accounting standard, from the perspective of the custodian, pricing vendor, financial statement preparer and auditor.
To view a webcast replay of the forum, or for more information on the toolkit, go to the U.S. Insitutional page at northerntrust.com. |
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A new white paper from Northern Trust examines the implications of dividend-based investment strategies, including enhanced indexing and active management, for taxable investors such as corporations and specialized trusts.
The paper, “Dividends’ Impact on Taxable Investors,” has four sections: - A review of how the dividend tax
laws affect three specific groups of investors: individuals,
corporations and specialized trusts.
- A discussion of the investment
impact of dividends, which is applicable to all taxable
investors regardless of the differences in their specific
tax laws.
- A discussion of methods to implement
dividend-based strategies while also focusing on key
portfolio construction considerations.
- A framework for developing dividend-based investment strategies.
To download the paper, select “Institutional” on the “Insights & Research” page at northerntrust.com. |
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A paper from the Private Equity Council seeks to provide policymakers, legislators and investors with a deeper understanding of the causes of the global credit crisis. The paper also aims to help professionals better assess proposals for dealing with its aftershocks.
“Demystifying the Credit Crunch” does not advocate a particular response to the current situation. Instead, the paper’s introduction states the goal is “to provide a foundation for further exploration and analysis by those tasked with writing and thinking about the credit crunch and developing appropriate public and private sector responses to prevent future dislocations.” The paper also includes a glossary of terms.
Go to privateequitycouncil.org to download a copy of the paper. |
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Attendees at a recent conference addressing the challenges to government-sponsored retirement systems learned that public sectors plans often are the object of “pension envy” by private-sector employees.
The May 2008 Wharton Impact Conference was sponsored by the Wharton School’s Pension Research Council and the Boettner Center for Pensions and Retirement Research. During the conference, Olivia S. Mitchell, executive director of the Pension Research Council and Boettner Center, noted some taxpayers are jealous of the pensions public employees receive. Attendees learned the reason for this was two-fold:
1) Income replacement ratios tend to be higher for public employees than for private sector workers, and
2) most government retirement systems are defined benefit plans, while corporations are shifting increasingly toward defined contribution plans.
The conference featured presentations and discussions by leading academics, public pension sponsors and advisors, and was organized by Mitchell and Gary Anderson, consultant and former executive director of the Texas Municipal Retirement System. Among the topics addressed were estimating state and local government pension liabilities, marking public plan liabilities to market, funding volatility and best practices in the public pension arena.
For a copy of the working paper summarizing conference highlights, go to pensionresearchcouncil.org. |
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