This article is part of a series of case studies we are conducting for various 401K plans. In this article, we will discuss how participants in Hewlett Packard 401K can achieve reasonable investment results using asset allocation strategies. We will also discuss how those portfolios are positioned in today’s market environment.
Hewlett Packard (Ticker:HPQ) has the "Hewlett Packard 401K".
Hewlett Packard Company (commonly known as 'HP') (NYSE: HPQ) is one of the largest IT companies. Founded by Bill Hwelett and Dave Packard in Palo Alto, California, HP was the earliest technology company that eventually led the formation of Silicon Valley in the San Francisco bay area. Today Hewlett-Packard has over 300 thousands employees world wide.
HP is renown to be employee friendly. It has been named several times as one of the best companies to work for. Its 401k plan provides a fairly diversified array of high quality funds.
Hewlett Packard 401K's 401K plan consists of 29 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, Emerging Market Equity, REITs, Fixed Income. Five Core Asset ETF Benchmark's 401K plan consists of funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, Emerging Market Equity, REITs, Fixed Income.
| The list of minor asset classes covered by Hewlett Packard 401K | The list of minor asset classes covered by Five Core Asset ETF Benchmark |
|---|---|
| Asset Class | Hewlett Packard 401K | Five Core Asset ETF Benchmark | ||
|---|---|---|---|---|
| Total | 29 |
As of Jun 22, 2011, Hewlett Packard 401K investment choice is rated as above average and Five Core Asset ETF Benchmark investment choice is rated as 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:
| Attribute | Hewlett Packard 401K | Five Core Asset ETF Benchmark | ||
|---|---|---|---|---|
| Diversification | great (97%) | |||
| Fund Quality | average (64%) | No Rating | ||
| Portfolio Building | above average (66%) | No Rating | ||
| Overall Rating | above average (75%) | No Rating |
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 purpose, we also include the moderate model portfolios of a typical 5 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
REITs: IYR or VNQ or ICF
Fixed Income: AGG or BND
Performance chart (as of Jun 22, 2011)
Performance table (as of Jun 22, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Hewlett Packard 401K Tactical Asset Allocation Moderate |
10% | 73% | 11% | 89% | 12% | 95% |
| Hewlett Packard 401K Strategic Asset Allocation Moderate |
15% | 170% | 5% | 26% | 7% | 37% |
| Five Core Asset ETF Benchmark Tactical Asset Allocation Moderate |
11% | 80% | 10% | 74% | 12% | 77% |
| Five Core Asset ETF Benchmark Strategic Asset Allocation Moderate |
16% | 128% | 5% | 17% | 7% | 27% |
Currently are doing well. But these asset classes are not available to Hewlett Packard 401K participants.
To summarize, Hewlett Packard 401K plan participants can achieve reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles.
Currently, the tactical asset allocation strategy indicates overweighing on
US Equity, Foreign Equity, REITs, Emerging Market Equity
and Fixed Income
funds.
Disclosure:
MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
Symbols:HPQ, CASH, SPY, VTI, VEU, VWO, VNQ, BND, ICAEX, ARTIX, PHIYX, LZEMX, PRRIX, VPMCX, RNWFX, PIGLX, MIDJX, DODFX, DSFRX, FMAGX, FCNTX, FRESX, FLPSX, DODGX, PTRIX, PEBIX, PISIX, PIGIX, PFMIX, PTSHX, PFGCX, VEXMX, CRIMX
Exchange Tickers:
(HPQ),
(CASH),
(SPY),
(VTI),
(VEU),
(VWO),
(VNQ),
(BND),
(ICAEX),
(ARTIX),
(PHIYX),
(LZEMX),
(PRRIX),
(VPMCX),
(RNWFX),
(PIGLX),
(MIDJX),
(DODFX),
(DSFRX),
(FMAGX),
(FCNTX),
(FRESX),
(FLPSX),
(DODGX),
(PTRIX),
(PEBIX),
(PISIX),
(PIGIX),
(PFMIX),
(PTSHX),
(PFGCX),
(VEXMX),
(CRIMX)