News Column

Study Demonstrates Value of John Hancock Asset Allocation Portfolios for 401k Plan Participants

May 24, 2014



By a News Reporter-Staff News Editor at Investment Weekly News -- Participants in qualified plans serviced by John Hancock Retirement Plan Services (RPS) who invested exclusively in a single John Hancock asset allocation portfolio earned better returns on average than participants who selected individual investment options to form their portfolios over the five, ten, and fifteen year periods ending December 31, 2012.(1) This is according to a commissioned study of John Hancock USA recordkeeping clients conducted by Burgess Management & Research Inc.

The recent study revealed a number of outcomes, including that the average annual return earned by participants invested in John Hancock Lifestyle portfolios has exceeded the average annual return earned by those invested in non-asset allocation investment options by 106 bps (1.06%) over 15 years. Results like this help show the benefits of diversification in a single choice and why it may be important to give participants more opportunity for what the company calls "investing smart."

"Saving early, saving more and investing smart is the golden rule for long term investing and asset allocation options could be a great example of investing smart for a participant," said Andrew Ross, senior vice president of Marketing and Product Development, John Hancock RPS.

Better Returns, When Every Dollar Counts

Investing smart and achieving better returns could be even more of a benefit for those participants whose 401(k) balance is important, such as people with a low balance and nearing or in retirement. The 5- year study found that participants with low balances whose assets were invested in Lifestyle investment options earned higher returns, with improved spreads varying by age from 184bps to 320bps (1.84% to 3.20%). The oldest participants, 60 years and older, earned the largest spread.

"We believe that outcomes matter, choice is important and that to retire comfortably, it's not enough to just get in the plan. We help more participants get into diversified portfolios with over 78 percent of our 1.7 million participants invested in an asset allocation option," said Ross.(2) "This study is about real results earned by real participants and demonstrates the effectiveness of these portfolios in retirement plans across all risk categories and age groups."

Participants in John Hancock Asset Allocation Funds Benefited from Holding More Diversified Portfolios

The study found that participants in John Hancock asset allocation investment options, those in Lifestyle investment options in particular, earned better returns because the majority of them adopted and adhered to asset allocations that were more diversified than those implicitly adopted by non-asset allocation participants, who tended to select investment options that resulted in asset allocations that fell at the extremes of the risk spectrum, aggressive or conservative. "Just looking at the past five years, the impacts of investment selections by participants became clear when comparing the returns of Lifestyle participants and non-asset allocation participants. About 75 percent of non-asset allocation participants invested aggressively or conservatively, and these were the risk segments where they earned some of the lowest returns," said Ross in review of the study.

Asset Allocation Helped Investors Stay the Course

The study found that participants who significantly altered their asset allocations, defined as change in the allocation to equities of more than +/- 25 percentage points, earned substantially lower returns. In the recent five-year period, participants who maintained their entire portfolio in a Lifestyle Fund earned a return of 3.45 percent on average, but those who started in a specific Lifestyle Fund and then altered their asset allocation significantly by selecting other investment options, earned a return of just 0.94 percent on average. "The results in regard to participants who altered their asset allocations over time are striking. They demonstrate the value of our asset allocation investment options and point to the importance of maintaining your investment strategy over time and not over-reacting to market turmoil," said Ross.

"We believe our asset allocation portfolios when used in combination with our participant education materials may help participants stay the course with their investment strategies, which matters when it comes to longer-term planning like preparing for retirement," said Ross. "The study has shown John Hancock's asset allocation options have worked well for participants, and we're continuing to work on making it easier for advisors to offer a variety of investment options to plan sponsors with an investment platform backed by our Fiduciary Standards Warranty."

Keywords for this news article include: Finance and Investment, John Hancock Retirement Plan Services.

Our reports deliver fact-based news of research and discoveries from around the world. Copyright 2014, NewsRx LLC


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Source: Investment Weekly News


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