Oppenheimer Finds 'Home Bias' Among DC Plans

Although defined contribution fund managers pay lip service to global investment opportunities, many DC plans actually have a “home bias” in their investments and are severely underweighted in their overseas exposure, according to a paper released by OppenheimerFunds, Inc.

According to the paper, there exist “significant misperceptions” about both U.S. and non-U.S. market performance. The study, which was developed from the results of a 1,000 DC plan investors conducted by Aurora Market Research, shows that 57% of respondents incorrectly believed the U.S. equity market has consistently been the world's top performer between 1970 and 2000. In reality, the U.S. equity market only held the top position twice during that 30-year period.

"Despite evidence that globally-focused portfolios will be necessary to achieve long-term growth, defined contribution plan participants in this country overwhelmingly overlook global and international investment products when constructing their retirement portfolios," stated Kathleen Beichert, senior vice president and head of OFI's retirement group.

The research also found that more than half (52%) of respondents described political and market risks as their primary concerns. Moreover, 60% of respondents were unable to state the difference between international investments (which include non-U.S. based companies but very heavily invested in foreign developed markets) and global investments (companies based anywhere in the world including emerging market opportunities).

"Exposure to global equities and fixed income opportunities could potentially mean the difference between accumulating enough assets and income for a secure retirement or falling short," stated Brian Levitt, OFI's Economist and Head of Capital Market Research.

Levitt added the survey found that 21% of respondents believe that changing their asset allocation, a likely outcome of learning about global investing, would help them reach their retirement goals.

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