Employers flock to gov't funds to safeguard DC plans

More employer-sponsored retirement plans may start to offer Treasury and government money market mutual funds to minimize the risk of losses, according to a survey of plan consultants released today by Pacific Investment Management Co. LLC.
MAR 31, 2009
More employer-sponsored retirement plans may start to offer Treasury and government money market mutual funds to minimize the risk of losses, according to a survey of plan consultants released today by Pacific Investment Management Co. LLC. Fully 61% of 32 investment consultants surveyed said that they expected defined contribution plans to add Treasury or government-only money market funds to their offerings. In addition, stable-value funds have come under closer scrutiny — 61% of the consultants said that they were helping to evaluate existing stable-value offerings by studying the underlying manager performance. The consultants, which collectively served more than 1,400 clients representing total assets of $1.6 trillion, received the survey in December and completed it during the first week in January. The consultants said that DC plans are most concerned with capital preservation, diversification and inflation protection, Newport Beach, Calif.-based Pimco reported. “Given the extreme market volatility and significant decline in defined contribution account balances over the past year, it’s not surprising that defined contribution plan sponsors are focused on reducing the risk that participants face,” Stacy Schaus, senior vice president and DC leader at Pimco, said in a statement. Those surveyed also ranked Treasury inflation protected securities, commodities and real estate investment trusts as the top asset classes to achieve that protection. Although 94% of consultants said that they thought that target-date funds would continue to be the most prevalent form of default investment, 35% said that plan sponsors were reconsidering or revising the asset allocation. Most often, plan sponsors change the glide paths, or the mix of stocks and bonds that change over the time limit of the fund, to be more conservative or better-diversified, according to Pimco. Fully 78% of those surveyed said that they thought that plan sponsors expected to add guaranteed income products over the next two years. This is the fifth year that Pimco has surveyed the consultants. The firm had $747 billion in assets under management as of Dec. 31.

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