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Articles on UAUA
- American Flies Above United in Plan Structure, Below United in Returns
01/06/2011
AMR Corporation, through its subsidiaries, operates as a scheduled passenger airline in the United States. The company, through its principal subsidiary, American Airlines, Inc., provides scheduled airline service to approximately 160 destinations throughout North America, the Caribbean, Latin America, Europe, and Asia. The company was founded in 1934 and is headquartered in Fort Worth, Texas.
Their 401K plan consists of 27 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income.
Asset Class Number of funds REITs 0 Balanced Fund 2 Fixed Income 6 Commodity 0 Sector Fund 1 Foreign Equity 3 Emerging Market Equity 2 US Equity 12 Other 1 Total 27 The list of minor asset classes covered:
Diversified Emerging Mkts: EEM, GMM, PXH, DEM, SCHE
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
High Yield Bond: HYG, JNK, PHB
Inflation-protected Bond: TIP
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
Mid-cap Value: IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU
Moderate Allocation: AOM
Short-term Bond: CSJ, BSV, VCSH
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
Small Value: IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT
Technology: MTK, PTF, DBT, RYT, ROM
As of Jan 4, 2011, this plan investment choice is rated as 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 great (87%)
Fund Quality -- Rated as average (51%)
Portfolio Building -- Rated as below average (34%)
Overall Rating: average (55%)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 4 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
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
Performance chart (as of Jan 4, 2011)Performance table (as of Jan 4, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe American Airline 401k Super Saver Plan Tactical Asset Allocation Moderate 4% 35% 3% 31% 8% 68% American Airline 401k Super Saver Plan Strategic Asset Allocation Moderate 9% 104% 3% 22% 6% 43% Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate 1% 9% 7% 61% 11% 71% Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 11% 80% 3% 13% 7% 30% Currently Commodities, US Equity and Emerging Market are doing well.
The plan gives participants access to two of those three classes: US Equity and Emerging MarketOver the long haul, this plan comes in under the 4 asset class benchmark which is a cause for concern. Four asset classes are good, the number of funds in the US and fixed income are good. Foreign equity and emerging markets could benefit from a couple of extra funds. There has to be some question on the performance of the individual funds.
When we compare the American Plan with the United plan which only has good funds in three asset classes, we see that the additional asset class does not deliver higher returns.
Performance chart (as of Jan 4, 2011)Performance table (as of Jan 4, 2011)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe American Airline 401k Super Saver Plan Tactical Asset Allocation Moderate 4% 35% 3% 31% 8% 68% American Airline 401k Super Saver Plan Strategic Asset Allocation Moderate 9% 104% 3% 22% 6% 43% United Airlines 401K Plan 2010 Tactical Asset Allocation Moderate 5% 62% 6% 89% 9% 102% United Airlines 401K Plan 2010 Strategic Asset Allocation Moderate 11% 103% 4% 30% 7% 49%
To summarize, American Airlines 401k Super Saver Plan participants can achieve the best investment returns by adopting asset allocation strategies that are tailored to their risk profiles.American Airlines 401k Super Saver Plan would do well by their employees to consider reviewing their existing funds to take full advantage of the extra asset class.
labels:investment,
Symbols:AMR,UAUA,SPY,VTI,EFA,VEU,EEM,VWO,AGG,BND,HYG,JNK,PHB,AOM,CIU,BIV,MTK,PTF,RYT,ROM,GWL,PFA,IVE,IWW,JKF,VTV,PWV,RPV,SCHV,EFV,PID,DWM,IVV,IYY,IWV,VV,DLN,RSP,SCHX,IVW,IWZ,JKE,VUG,QQQQ,RPG,SCHG,IJJ,IWS,JKI,VOE,PWP,RFV,UVU,IJH,IWR,JKG,VO,MDY,EMM,PJG,DON,EZM,MVV,
- United Airlines Upgrades their 401K Plan
11/13/2010
We recently published a summary of the United Airlines 401K plan. Subsequent to this, United Airlines informed us that they have upgraded their plan in October 2010 and we now review the new plan.
The upgraded plan has 21 funds --little changed in number. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income -- again the same as the last plan.We will compare the old and new funds as they both have similar composition.
Asset Class New Plan Old Plan U.S. Equity Excluding Company Stock 6 6 International Equity 2 2 Balanced Funds 3 4 Fixed Income 4 3 Target Date 5 6
As of Nov 11, 2010, the new plan's 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.Plan Rating Attribute New Plan Old Plan Diversification 77% 43% Fund Quality 86% 20% Portfolio Building 76% 42% Overall Rating 79% 35%
This is a significant jump across the board without introducing a lot more funds. The key reasons for the improvement are:- US and international equities have large, medium and small cap alternatives whereas previously it was just large cap stock
- The fixed income choices are higher quality
This should be a well performing three asset class plan.
Performance chart (as of Nov 10, 2010)
Performance table (as of Nov 10, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airlines Flight Attendant 401(k) Plan Tactical Asset Allocation Moderate 6% 53% 6% 67% 9% 92% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 8% 89% 0% -0% 5% 29% United Airline 401K Plan 2010 Tactical Asset Allocation Moderate 8% 92% 6% 78% 10% 114% United Airline 401K Plan 2010 Strategic Asset Allocation Moderate 12% 123% 3% 23% 8% 57%
If we now compare this to the Kellogg plan as we did in the last article:
Performance chart (as of Nov 11, 2010)Performance table (as of Nov 11, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airline 401K Plan 2010 Tactical Asset Allocation Moderate 8% 92% 6% 78% 10% 114% United Airline 401K Plan 2010 Strategic Asset Allocation Moderate 12% 123% 3% 23% 8% 57% Kellogg 401k Plan Tactical Asset Allocation Moderate 2% 19% 4% 45% 8% 72% Kellogg 401k Plan Strategic Asset Allocation Moderate 13% 100% 3% 16% 8% 43% We can see that the United Plan now nudges ahead of the Kellog plan in terms of risk adjusted returns over the last five years.
Kudos to United in recognizing that their 401K plan needed to be improved and providing a free upgrade for its employees.
labels:investment,
Symbols:AGG,AOK,AOM,BIV,BND,CIU,DLN,DRF,EFA,ELG,ELV,GWL,IEI,IPF,ITE,IVE,IVV,IVW,IWV,IWW,IWZ,IYF,IYY,JKE,JKF,K,PFA,PFI,PLK,PWV,QQQQ,RPG,RPV,RSP,RYF,SCHG,SCHV,SCHX,SHV,SHY,SPY,TZD,TZE,TZI,TZO,UAUA,USY,VEU,VFH,VGIT,VGSH,VTI,VTV,VUG,VV,
- United Airlines 401K Flies Above the ETF Benchmark, But Below Kellogg
11/12/2010
United Airlines (UAUA) Flight Attendant 401(k) Plan's 401K plan consists of 22 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
Summary
US Equity 7 funds (including company stock)
International Equity 2 funds
Balanced Funds 4 funds
Fixed income 3 fund
Target date 6 fundsIf the company's stock is excluded (better left for an employee stock purchase plan) as well as the target date funds (which can't be effectively leveraged in a portfolio), the participant is left with 15 funds in three asset classes.
We compare this with the Kellogg (K) plan, which has three asset classes -- so that we can see what contributes to higher performance portfolio. In this case, Kellogg only has seven funds with a very limited choice in fixed income and international asset classes.
Asset Class United Airlines Kellogg U.S. Equity Excluding Company Stock 6 5 International Equity 2 1 Balanced Funds 4 Fixed Income 3 1 Target Date 6
The list of minor asset classes covered:Conservative Allocation: AOK
Financial: IYF, VFH, IPF, PFI, DRF, RYF
Foreign Large Blend: EFA, VEU, GWL, PFA
Intermediate Government: IEI, VGIT, ITE
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
Moderate Allocation: AOM
Retirement Income:
Short Government: SHY, SHV, VGSH, PLK, USY
Target Date 2000-2010: TZD
Target Date 2011-2015: TZE
Target Date 2021-2025: TZI
Target Date 2031-2035: TZO
Target Date 2041-2045:
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHXAs of Nov 8, 2010, this plan investment choice is rated as averagebased on MyPlanIQ Plan Rating methodology that was designed to measure how effective a plan's available investment funds are. We compare the detailed ratings with the Kellogg plan.
Plan Rating Attribute United Airlines Kellogg Diversification 43% 13% Fund Quality 20% 99% Portfolio Building 42% 47% Overall Rating 35% 53% The key difference between the two plans is that the United plan has more lower quality funds, whereas the Kellogg plan has fewer higher quality plans. In the end, the Kellogg plan wins the ratings battle, but we should wait to see what that means in returns.
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (SAA and TAA, both provided by MyPlanIQ). For comparison purposes, 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 BNDPerformance chart (as of Nov 8, 2010)
click to enlarge
Performance table (as of Nov 8, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airlines Flight Attendant 401(k) Plan Tactical Asset Allocation Moderate 8% 71% 6% 62% 10% 94% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 10% 103% 0% -3% 5% 30% Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate 2% 19% 3% 29% 5% 48% Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate 13% 106% 1% 3% 5% 21%
Currently, asset classes in US Equity (SPY, VTI), Foreign Equity (EFA, VEU) and Fixed Income (AGG, BND) are doing relatively well. These asset classes are available to United Airlines Flight Attendant 401(k) Plan participants.The United plan outperforms the 3 Asset SIB (as did the Kellogg plan), let's now see how the two plans compare directly.
Performance chart (as of Nov 8, 2010)
Performance table (as of Nov 8, 2010)
Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe United Airlines Flight Attendant 401(k) Plan Tactical Asset Allocation Moderate 8% 71% 6% 62% 10% 94% United Airlines Flight Attendant 401(k) Plan Strategic Asset Allocation Moderate 10% 103% 0% -3% 5% 30% Kellogg 401k Plan Tactical Asset Allocation Moderate 4% 35% 4% 42% 8% 73% Kellogg 401k Plan Strategic Asset Allocation Moderate 15% 115% 3% 15% 8% 45% The Kellogg portfolios outperform the United portfolios based on superior fund quality.
To summarize, United Airlines Flight Attendant 401(k) Plan plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Improving the number of asset classes and quality of funds would enable portfolios to deliver better returns.
labels:investment,
Symbols:AGG,AOK,AOM,BIV,BND,CIU,DLN,DRF,EFA,ELG,ELV,GWL,IEI,IPF,ITE,IVE,IVV,IVW,IWV,IWW,IWZ,IYF,IYY,JKE,JKF,K,PFA,PFI,PLK,PWV,QQQQ,RPG,RPV,RSP,RYF,SCHG,SCHV,SCHX,SHV,SHY,SPY,TZD,TZE,TZI,TZO,UAUA,USY,VEU,VFH,VGIT,VGSH,VTI,VTV,VUG,VV,