Assets in defined contribution plans flowed to target-date and international equity funds in 2012, according to a new tracking tool launched by the Defined Contribution Solutions group atNorthern Trust.
In 2012, the tracker shows, participants lightened up on U.S. equity investments even as the Russell 3000 Index of U.S. stocks gained 16.4 percent for the year. U.S equities remained the largest asset class at 31.1% of holdings, but fixed income saw inflows of 9.2% for the year despite lower yields, as DC investors looked for safe havens from volatility and uncertainty in the equity markets.
Target retirement date funds dominated asset inflows in the DC plans tracked by Northern Trust, growing from 11.9% to 14.6% of participant allocations during 2012. International equity, meanwhile, grew from 5.9% to 7.6% of allocations in the tracker universe.
"As the preferred qualified default investment of most DC plans, target retirement date funds have benefited from the increased adoption of auto-enrollment and other automated features, and we anticipate participant outcomes will show potential improvement through the use of these professionally managed investment solutions," stated Susan Czochara, senior product manager in Defined Contribution Solutions.
"Investors are also taking advantage of the expanding investment universe through exposure to broader international equity benchmarks that incorporate the full ex-U.S. global equity opportunity set, further diversifying their sources of risk and return.
Created to serve as a barometer for DC participant asset flows, Northern Trusts Defined Contribution Tracker analyzes data from a universe of 85 retirement plans in the United States with daily valuation, representing approximately 1.5 million participants and $190 billion in market value, a subset of the total DC assets managed or serviced by Northern Trust.