ATT Dials Up A Mediocre Plan
12/30/2010 0 comments
The AT&T Long Term Savings and Security Plan (Plan) is a defined contribution plan established by AT&T Corp. (ATTC) to provide a convenient way for eligible non-management employees of participating ATTC companies to save on a regular and long-term basis.
We now analyze the AT&T Long Term Savings and Security Plan We will discuss the investment choices and present the plan rating by MyPlanIQ. AT&T and Wal-Mart have similar plans that are restricted in terms of asset classes but we will compare the two as they both Fortune top ten companies.
The ATT 401K plan consists of 25 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
| Asset Class | Ticker | Name |
|---|---|---|
| Intermediate-Term Bond | VBMFX | Vanguard Total Bond Market Index |
| Mid-Cap Growth | RPMGX | T. Rowe Price Mid-Cap Growth |
| LARGE BLEND | VTSMX | Vanguard Total Stock Mkt Idx |
| World Allocation | RIRFX | American Funds Capital Inc Bldr R5 |
| Foreign Large Blend | VGTSX | Vanguard Total Intl Stock Index |
| Foreign Large Blend | INLBX | Morgan Stanley International B |
| ROOT | CASH | CASH |
| LARGE BLEND | LMNVX | Legg Mason Value Instl |
| LARGE VALUE | VWNFX | Vanguard Windsor II |
| World Allocation | PAUIX | PIMCO All Asset All Authority Inst |
| LARGE GROWTH | VWUAX | Vanguard U.S. Growth Adm |
| Moderate Allocation | USBSX | USAA Balanced Strategy |
| SMALL BLEND | TRSSX | T. Rowe Price Instl Small-Cap Stock |
| Moderate Allocation | PAAIX | PIMCO All Asset Instl |
| Intermediate-Term Bond | FBIDX | Fidelity U.S. Bond Index |
| LARGE BLEND | VTSMX | Vanguard Total Stock Mkt Idx |
| LARGE BLEND | VFINX | Vanguard 500 Index Investor |
| MID-CAP BLEND | VEXMX | Vanguard Extended Market Idx |
| LARGE GROWTH | FMAGX | Fidelity Magellan |
| Foreign Large Blend | VGTSX | Vanguard Total Intl Stock Index |
| LARGE BLEND | FDGFX | Fidelity Dividend Growth |
| MID-CAP BLEND | FLPSX | Fidelity Low-Priced Stock |
| High Yield Bond | SPHIX | Fidelity High Income |
| Foreign Large Growth | FDIVX | Fidelity Diversified International |
| HYBRID ASSETS | T | AT&T Inc |
The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
High Yield Bond: HYG, JNK, PHB
Hybrid Assets:
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Large Growth: IVW, IWZ, JKE, VUG, ELG, QQQQ, RPG, SCHG
Large Value: IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Moderate Allocation: AOM
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
World Allocation: AOR, AOA
| Asset Class | ATT Funds | Wal-Mart Funds |
|---|---|---|
| REITs | 0 | 0 |
| Balanced Fund | 4 | 2 |
| Fixed Income | 3 | 4 |
| Commodity | 0 | 0 |
| Sector Fund | 0 | 0 |
| Foreign Equity | 4 | 4 |
| Emerging Market Equity | 0 | 0 |
| US Equity | 12 | 6 |
| Other | 2 | 0 |
| Total | 25 | 16 |
We note that the plans are similar in nature with the main difference being in more choices in US and balanced funds.
As of Dec 23, 2010, this plan investment choice is rated as above average based on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are . It has the following detailed ratings:
Diversification -- Rated as above average (77%)
Fund Quality -- Rated as average (50%)
Portfolio Building -- Rated as above average (79%)
Overall Rating: above average (70%)
Portfolio Discussions
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, we also include the moderate model portfolios of a typical 3 asset SIB (Simpler Is Better) plan . This SIB plan has the following candidate index funds and their ETFs equivalent:
US Equity: SPY or VTI
Foreign Equity: EFA or VEU
Fixed Income: AGG or BND
Performance table (as of Dec 23, 2010)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| AT&T Long Term Savings and Security Plan Tactical Asset Allocation Moderate | 10% | 110% | 9% | 110% | 10% | 98% |
| AT&T Long Term Savings and Security Plan Strategic Asset Allocation Moderate | 9% | 117% | 3% | 20% | 5% | 39% |
| Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate | -2% | -17% | 2% | 19% | 4% | 34% |
| Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate | 11% | 76% | 1% | 2% | 4% | 17% |
Currently Commodities, US Equity and Emerging Market are doing well. Only US Equity is available to AT&T Long Term Savings and Security Plan participants.
This plan beats the three asset benchmark by virtue of the US asset class choices. If would be a stronger plan with more fixed income choices and an additional asset class.
We now compare the ATT and Wal-Mart plans.
Performance table (as of Dec 23, 2010)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| AT&T Long Term Savings and Security Plan Tactical Asset Allocation Moderate | 10% | 110% | 9% | 110% | 10% | 98% |
| AT&T Long Term Savings and Security Plan Strategic Asset Allocation Moderate | 9% | 117% | 3% | 20% | 5% | 39% |
| Wal-Mart Profit Sharing and 401(k) Plan Tactical Asset Allocation Moderate | 9% | 101% | 8% | 97% | 8% | 84% |
| Wal-Mart Profit Sharing and 401(k) Plan Strategic Asset Allocation Moderate | 9% | 103% | 2% | 16% | 5% | 34% |
As anticipated, the additional fund choices in the asset classes allow the ATT plan to squeeze out an extra point in the TAA although it's too close to call with SAA.
To summarize, both AT&T and Wal-Mart would benefit their employees by adding an extra asset class such as emerging markets or real estate. They both have similar performance but ATT just wins out by virtue of more fund choices.
labels:investment,
Symbols:T,SPY,VTI,EFA,VEU,AGG,BND,HYG,JNK,PHB,AOM,CIU,BIV,AOR,AOA,GWL,PFA,IVE,IWW,JKF,VTV,PWV,RPV,SCHV,IVV,IYY,IWV,VV,DLN,RSP,SCHX,IVW,IWZ,JKE,VUG,QQQQ,RPG,SCHG,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,IJR,IWM,JKJ,VB,PJM,DES,SAA,UWM,SCHA,IJK,IWP,VOT,PWJ,RFG,UKW,
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