American Flies Above United in Plan Structure, Below United in Returns

01/06/2011 Share 0 comments

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.

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)

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 Market

Over 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)

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,