Adobe Systems 401K Can Benefit from More Diversified Funds in Emerging Market Stocks and REITs
06/22/2011 0 comments
Retirement investing is a long term process. This report reviews Adobe Systems Inc 401K Retirement Savings Plan. We will discuss the investment choices and present the plan rating by MyPlanIQ. Current economic and market conditions are discussed in the context of the investment portfolios in the plan. We will then show how participants in Adobe Systems Inc 401K Retirement Savings Plan can achieve reasonable investment results using asset allocation strategies.
Plan Review and Rating
Adobe Systems Incorporated operates as a diversified software company in the Americas, Europe, the Middle East, Africa, and Asia. It offers a line of creative, business, Web, and mobile software and services used by creative professionals, knowledge workers, consumers, original equipment manufacturers, developers, and enterprises. Adobe is famous for its Acrobat PDF suite of tools, Photoshops and Flash products.
Adobe Systems Inc 401K Retirement Savings Plan's 401K plan consists of 25 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
The following is the list of funds available in the plan.
| Asset Class | Ticker | Name |
|---|---|---|
| SMALL VALUE | DFSVX | DFA U.S. Small Cap Value I |
| Foreign Large Value | DODFX | Dodge & Cox International Stock |
| Intermediate-Term Bond | PTTRX | PIMCO Total Return Instl |
| Small Growth | VEXPX | Vanguard Explorer |
| MID-CAP BLEND | VIEIX | Vanguard Extended Market Idx Instl |
| Foreign Large Blend | VFWIX | Vanguard FTSE All-World ex-US Index Inv |
| LARGE GROWTH | VFTNX | Vanguard FTSE Social Index Instl |
| Inflation-Protected Bond | VIPSX | Vanguard Inflation-Protected Secs |
| LARGE BLEND | VINIX | Vanguard Institutional Index |
| LARGE GROWTH | VMRAX | Vanguard Morgan Growth Adm |
| ROOT | CASH | CASH |
| Target Date 2000-2010 | VTOVX | Vanguard Target Retirement 2005 |
| Target Date 2000-2010 | VTENX | Vanguard Target Retirement 2010 |
| Target Date 2011-2015 | VTXVX | Vanguard Target Retirement 2015 |
| Target Date 2016-2020 | VTWNX | Vanguard Target Retirement 2020 |
| Target Date 2021-2025 | VTTVX | Vanguard Target Retirement 2025 |
| Target Date 2026-2030 | VTHRX | Vanguard Target Retirement 2030 |
| Target Date 2031-2035 | VTTHX | Vanguard Target Retirement 2035 |
| Target Date 2036-2040 | VFORX | Vanguard Target Retirement 2040 |
| Target Date 2041-2045 | VTIVX | Vanguard Target Retirement 2045 |
| Target Date 2050+ | VFIFX | Vanguard Target Retirement 2050 |
| Retirement Income | VTINX | Vanguard Target Retirement Income |
| Intermediate-Term Bond | VBTIX | Vanguard Total Bond Market Index Inst |
| Moderate Allocation | VWELX | Vanguard Wellington |
| LARGE VALUE | VWNFX | Vanguard Windsor II |
As of Jun 20, 2011, this plan investment choice is rated as average based on MyPlanIQ Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:
Diversification -- Rated as average (46%)
Fund Quality -- Rated as average (64%)
Portfolio Building -- Rated as average (59%)
Overall Rating: average (56%)
Current Economic and Market Conditions
Last week markets were somewhat stabilized a bit. Key observations are
-
Commodities (DBC) had a negative week while gold (GLD) was again strong. Gold is now ranked on top among all major asset trend scores.
-
U.S. REITs (VNQ) recovered and now stood on number 2 position.
- Fixed income continued to be strong, especially long term government bonds (IEF) or (TLT).
Overall, markets are still struggling to decipher various economic indicators and figure out where global economy is heading.
For more information on how these assets are ranked, please see here.
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 chart (as of Jun 20, 2011)
Performance table (as of Jun 20, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Adobe Systems Inc 401K Retirement Savings Plan Tactical Asset Allocation Moderate | 8% | 85% | 9% | 87% | 9% | 87% |
| Adobe Systems Inc 401K Retirement Savings Plan Strategic Asset Allocation Moderate | 10% | 129% | 4% | 26% | 6% | 41% |
| Three Core Asset ETF Benchmark Tactical Asset Allocation Moderate | 4% | 22% | 3% | 23% | 5% | 38% |
| Three Core Asset ETF Benchmark Strategic Asset Allocation Moderate | 17% | 126% | 4% | 12% | 5% | 20% |
Currently REITs and Commodities are doing well. But these asset classes are not available to Adobe Systems Inc 401K Retirement Savings Plan participants.
To summarize, Adobe's 401k plan has low cost Vanguard funds and several solid long term funds such as PIMCO Total Return Instl (PTTRX) and Dodge & Cox International Stocks (DODFX). This plan is again a developed country and U.S. centric with no exposure in emerging market stocks and real estate investment trusts (REITs). Adding funds to allow exposure in these two asset classes can increase diversification effect dramatically.
Symbols: ADBE, EEM, IYR, DODFX, PTTRX, VWELX, VWNFX
Exchange Tickers: (ADBE), (CASH), (VTI), (VEU), (BND), (DFSVX), (DODFX), (PTTRX), (VEXPX), (VIEIX), (VFWIX), (VFTNX), (VIPSX), (VINIX), (VMRAX), (VTOVX), (VTENX), (VTXVX), (VTWNX), (VTTVX), (VTHRX), (VTTHX), (VFORX), (VTIVX), (VFIFX), (VTINX), (VBTIX), (VWELX), (VWNFX)
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