9/21 IS EVERYONE IN YET?
Entire article and tables.
contraryinvestor.com
Is Everyone In Yet?...Maybe at this point in the market cycle it's a redundant question. It would simplistically appear to us that most everyone who has wanted a "piece of the action" in the US equity market has had ample opportunity to partake at anytime over the last few years. It's hard for us to believe that there are a whole new flock of potential buyers just waiting to strike. Maybe this is why the market indices have not provided their typical flare gun investment performance returns this year. Luckily the Fed does give us a little insight into the activities of some of these buyers in the Flow of Funds report we began dissecting on Tuesday. Sit back, have a look at some charts and tables, and you be the judge.
Here we are largely looking at the pension fund asset allocation of corporate America. They seem pretty full, don't you agree? As you know, private sector pension funds largely come in two flavors - defined benefit plans and defined contribution plans. In one, corporations promise to provide a certain benefit at retirement to their employees and are essentially on the hook for funding this promise. In defined contribution plans, corporations or employers only promise a certain contribution to the fund, not an ultimate dollar benefit. In the evolution of pension plan existence, defined benefit plans are becoming relics. After all, can you blame corporate plan sponsors? Why promise a stated dollar benefit when funding that benefit can potentially become a noticeable liability on your balance sheet and possibly ding the old bottom line from time to time. Hence the incredible popularity of 401(k) and defined contribution plans.
Another lesser know, but incredibly telling, set of facts is what private pension plan sponsors are actually doing in defined benefit and defined contribution plans. The following table details net private defined benefit and defined contribution plan purchases of equities and equity mutual funds over the last twelve years:
As would seem rational and fiduciary-like, defined benefit plan sponsors have been net sellers of equities as the market has risen and their allocation to equities has risen over time. |
