08/13/2011

Franklin Resources Inc. is a publicly owned investment manager. The firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. Franklin Resources, Inc was founded in 1947 and is based in San Mateo, California. Franklin Templeton specializes in mutual fund management.

It is thus interesting to see how Franklin designs its Franklin Templeton Profit Sharing 401(k) Plan that is used by its employees for their retirement investing.

Their 401K plan consists of 31 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income.

As of Aug 9, 2011, 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 great (93%)
Fund Quality -- Rated as above average (67%)
Portfolio Building -- Rated as above average (65%)
Overall Rating: above average (74%)

A closer look at the plan reveals the following

• The plan uses its many funds. Templeton is famous for its global investing skills. In the plan, it provides Templeton Global Bond A and Templeton Developing Markets R. Both funds are stellar performers in foreign bonds and emerging market stocks investing.
• The plan uses Goldman Sachs Core Plus Fixed Income I, in addition to its Franklin Total Return R for U.S. core bond investments.
• The plan includes an equity index fund State Trust Bank S&P 500 Index Common Collective Trust, in addition to its famed mutual series funds (such as Mutual Discovery Z), indicating the money manager's acknowledgement to the benefit of using low cost index funds.
• Other than the two outside funds, the plan uses all of its hiqh quality funds that in general have average fund quality ranking of 67% in MyPlanIQ plan fund ranking.

The following shows how well a typical employee can do using these funds in the plan, compared with a Simple Is Better plan that uses only four index ETFs:

US Equity: SPY or VTI
Foreign Equity: EFA or VEU
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND

Performance table (as of Aug 9, 2011)

It is clear that the plan's model portfolios consistently outperformed the benchmark plan's, indicating its fund selection.

To summarize, Franklin Templeton Profit Sharing 401(k) Plan participants can achieve the best investment returns by adopting asset allocation strategies that are tailored to their risk profiles.

Franklin Templeton Profit Sharing 401(k) Plan would do well by their employees to consider reviewing their existing funds and adding an additional asset class.

Symbols: BEN, SPX, VTI, VEU, VWO, BND, GSNIX, FGSRX, FEACX, FRCGX, FKARX, FHIRX, FISRX, FLCRX, FRMCX, FRDRX, FSSRX, FVFRX, FSMRX, FTCRX, FGTRX, FTMRX, FTRRX, FUSRX, BEGRX, MDISX, MEURX, SVSPX, TDMRX, TEFRX, TPINX, TEMGX, TEGRX, TEMWX

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06/03/2011

Retirement investing is a long term process. This report reviews The Goldman Sachs 401(k) 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 investors in The Goldman Sachs 401(k) Plan can achieve reasonable investment results using asset allocation strategies.

Plan Review and Rating

As one of the largest investment banks in the world, Goldman Sachs (GS) does give its employees ample diversification opportunities. The plan consists of 36 funds. These funds enable participants to gain exposure to 6 major assets: US Equity, Foreign Equity, Commodity, Emerging Market Equity, REITs, Fixed Income.

As of Jun 2, 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 great (100%) 
Fund Quality -- Rated as below average (14%) 
Portfolio Building -- Rated as average (52%) 
Overall Rating: average (55%)

It is a bit surprising that the plan's fund quality is rated below average. In the plan, other than the low cost index funds, it provides many Goldman Sachs funds such as Goldman Sachs Asset Management L.P./Structured US Equity Fund (GSELX). This could possibly help your own fund business with the expense of lower qualities. We don't know what cost the plan is charged for these funds. 

Current Economic and Market Conditions

As we are clearly entering a seasonally weak period for risk assets, global economies have clearly slowed down. Recently released Case-Shiller housing index showed that the U.S. is now in a double dip state for housing prices. Unemployment rate has been stuck at 9% level. Additional indicators such as conference board consumer confidence index and Chicago ISM index are all pointing to a slow down in the summer season.

Amid a string of bad economic news, risk assets have come down a bit, though they are still ranked high at the moment. Long term treasury bonds, however, have shot up in the anticipation of weakened economy. The following table shows the major asset class ranking in terms of their momentum.

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 6 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 
Commodity: DBC 
Emerging Market Equity: EEM or VWO 
REITs: IYR or VNQ or ICF 
Fixed Income: AGG or BND 

Performance chart (as of Jun 2, 2011)

Performance table (as of Jun 2, 2011)

From the above table, one can see that the plan is comparable with six core asset benchmark. 

To summarize, participants in The Goldman Sachs 401(k) Plan can achieve very reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. This plan provides adquate diversification but can be improved by working on fund qualities. 

Symbols: GS, ^RUT, MLM, VTI, VEU, VWO, VNQ, DBC, BND, STLEX, SVSPX, VUSTX, VIGIX, VIVIX, VIMSX, SSEMX, VIPSX, STLAX, STLBX, WFBIX, STLCX, STLDX, STLFX, GMCFX, GSTGX, WACPX, GSELX, GCMAX, GSHTX, GSCGX, GSLAX, GSFIX, GGOIX, GREIX, QRAAX, PIGLX, SVRIX Exchange Tickers: (GS), (^RUT), (CASH), (MLM), (VTI), (VEU), (VWO), (VNQ), (DBC), (BND), (STLEX), (SVSPX), (VUSTX), (VIGIX), (VIVIX), (VIMSX), (SSEMX), (VIPSX), (STLAX), (STLBX), (WFBIX), (STLCX), (STLDX), (STLFX), (GMCFX), (GSTGX), (WACPX), (GSELX), (GCMAX), (GSHTX), (GSCGX), (GSLAX), (GSFIX), (GGOIX), (GREIX), (QRAAX), (PIGLX), (SVRIX)

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04/19/2011

The combination of a robust U.S. equity market and the proliferation of company-sponsored retirement plans helped push total assets in 401(k) pans over the $3 trillion threshold at close of last year, up 13% from 2009. The incidents in Japan, the Middle East and even as far back as New Orleans teach us the danger of living on borrowed time, the reactors, the governments the levees keeping things going -- just one more year. The temptation to delay until next time is very seductive until disaster strikes and the cost to repair, dwarfs the cost to prevent. Many working people put off their retirement investing -- just one more year until it becomes a "hair on fire" problem -- which it now is for baby boomers for whom retirement is a near and present danger.

The starting point for any retirement investing is the company provided retirement plan. Not all plans are created equal. Not all plans have the same number of choices, asset classes, quality of funds and, most importantly, risk adjusted returns.

Fedex has more funds but have one less asset class -- UPS has REITs and Fedex does not. Neither company provides Emerging Markets or Commodity funds.

Both companies have a wide choice of Target Date funds which may appeal to some but are expensive and have mixed reviews as to their value for money.

It is interesting that UPS has emerging market bonds but no emerging ma
There are easy ways to improve these plans with emerging market and commodity exposure.

As of Apr 18, 2011, UPS Savings Plan investment choice is rated as average and Federal Express (FedEx) 401K Plan for Pilots investment choice is rated as below 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:

Performance chart (as of Apr 18, 2011)

Performance table (as of Apr 18, 2011)

Currently Commodities, Real Estate and US Equity are doing well. US Equity and Real Estate available to UPS Savings Plan participants Only US Equities are available to FedEx participants.

When we add the six asset class SIB benchmark to the table, it is possible to see how the two compare against a reference.

Takeaways

• The UPS plan with its extra asset class has a three point lead over the FedEx plan when comparing tactical asset allocation
• The Six asset class benchmark has a three point lead over the UPS plan when comparing tactical asset allocation
• The FedEx plan without the recent burden of the Real Estate crash beats UPS when comparing strategic asset allocation
• The Six asset class benchmark beats the FedEx plan over five years where emerging markets and commodities offset the drag of real estatewhen comparing strategic asset allocation

With either plan, augmenting a retirement portfolio with emerging market equities and commodities will provide better diversification and likely higher risk adjusted returns. As inflation seems like a near certainty, commodity exposure becomes increasingly important.

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: UPS, FDX, BAEDX, EFA, BPRAX, SSINX, SBMRX, SVSPX, MDY, VGSIX, VTINX, IWM, VGTSX, VTRIX, VIPSX, VBTIX, VIFSX, VWNDX, VEMSX, VMISX, VWELX, VSMGX, VTINX, VSISX, AGG, BND, VTI, VNQ, IYR, DBC, VWO, EEM, EFA

Exchange Tickers: (UPS), (FDX), (BAEDX), (EFA), (BPRAX ), (SSINX), (SBMRX), (SVSPX), (MDY), (VGSIX), (VTINX), (IWM), (VGTSX), (VTRIX), (VIPSX), (VBTIX), (VIFSX), (VWNDX), (VEMSX), (VMISX), (VWELX), (VSMGX), (VTINX), (VSISX), (AGG), (BND), (VTI), (VNQ), (IYR), (DBC), (VWO), (EEM), (EFA)

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06/03/2011

Retirement investing is a long term process. This report reviews The Goldman Sachs 401(k) 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 investors in The Goldman Sachs 401(k) Plan can achieve reasonable investment results using asset allocation strategies.

Plan Review and Rating

As one of the largest investment banks in the world, Goldman Sachs (GS) does give its employees ample diversification opportunities. The plan consists of 36 funds. These funds enable participants to gain exposure to 6 major assets: US Equity, Foreign Equity, Commodity, Emerging Market Equity, REITs, Fixed Income.

As of Jun 2, 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 great (100%)
Fund Quality -- Rated as below average (14%)
Portfolio Building -- Rated as average (52%)
Overall Rating: average (55%)

It is a bit surprising that the plan's fund quality is rated below average. In the plan, other than the low cost index funds, it provides many Goldman Sachs funds such as Goldman Sachs Asset Management L.P./Structured US Equity Fund (GSELX). This could possibly help your own fund business with the expense of lower qualities. We don't know what cost the plan is charged for these funds. 

Current Economic and Market Conditions

As we are clearly entering a seasonally weak period for risk assets, global economies have clearly slowed down. Recently released Case-Shiller housing index showed that the U.S. is now in a double dip state for housing prices. Unemployment rate has been stuck at 9% level. Additional indicators such as conference board consumer confidence index and Chicago ISM index are all pointing to a slow down in the summer season.

Amid a string of bad economic news, risk assets have come down a bit, though they are still ranked high at the moment. Long term treasury bonds, however, have shot up in the anticipation of weakened economy. The following table shows the major asset class ranking in terms of their momentum.

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 6 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
Commodity: DBC
Emerging Market Equity: EEM or VWO
REITs: IYR or VNQ or ICF
Fixed Income: AGG or BND

Performance chart (as of Jun 2, 2011)

Performance table (as of Jun 2, 2011)

From the above table, one can see that the plan is comparable with six core asset benchmark. 

To summarize, participants in The Goldman Sachs 401(k) Plan can achieve very reasonable investment returns by adopting asset allocation strategies that are tailored to their risk profiles. This plan provides adquate diversification but can be improved by working on fund qualities. 

Symbols:GS, ^RUT, MLM, VTI, VEU, VWO, VNQ, DBC, BND, STLEX, SVSPX, VUSTX, VIGIX, VIVIX, VIMSX, SSEMX, VIPSX, STLAX, STLBX, WFBIX, STLCX, STLDX, STLFX, GMCFX, GSTGX, WACPX, GSELX, GCMAX, GSHTX, GSCGX, GSLAX, GSFIX, GGOIX, GREIX, QRAAX, PIGLX, SVRIX

Exchange Tickers: (GS), (^RUT), (CASH), (MLM), (VTI), (VEU), (VWO), (VNQ), (DBC), (BND), (STLEX), (SVSPX), (VUSTX), (VIGIX), (VIVIX), (VIMSX), (SSEMX), (VIPSX), (STLAX), (STLBX), (WFBIX), (STLCX), (STLDX), (STLFX), (GMCFX), (GSTGX), (WACPX), (GSELX), (GCMAX), (GSHTX), (GSCGX), (GSLAX), (GSFIX), (GGOIX), (GREIX), (QRAAX), (PIGLX), (SVRIX)