Wal-Mart (WMT) serves customers and members more than 200 million times per week at more than 8,692 retail units under 55 different banners in 15 countries. With fiscal year 2010 sales of $405 billion, Wal-Mart employs 2.1 million associates worldwide.
Wal-Mart operates retail stores located in all 50 states of the United States, wholly−owned subsidiaries in Argentina, Brazil, Canada, Japan, Puerto Rico and the United Kingdom, majority−owned subsidiaries in Central America, Chile and Mexico and joint ventures in India and China.
Wal-Mart Profit Sharing and 401(k) Plan's 401K plan consists of 18 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
They have 8 US funds (including the company's stock), 4 international funds, 5 fixed income funds and one balanced fund.
The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
Foreign Large Value: EFV, PID, DWM
Foreign Small/mid Growth: IFSM, VSS, SCHC
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
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Moderate Allocation: AOM
Short Government: SHY, SHV, VGSH, PLK, USY
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Us Equity: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
World Allocation: AOR, AOA
As of Dec 7, 2010, this plan investment choice is rated as average based on our Plan Rating methodology that measures the effectiveness of a plan's available investment funds. It has the following detailed ratings:
Diversification -- Rated as average (62%)
Fund Quality -- Rated as below average (29%)
Portfolio Building -- Rated as average (65%)
Overall Rating: average (53%)
We would like to see a review of the funds in each asset class and an additional asset class -- real estate or emerging markets to increase returns for the participants.
Current Economic and Market Conditions
We have experienced an uncertain 2010: plenty of worries on whether the US economy will climb out of the great recession and recover. Wal-Mart continues to thrive even in this economy and it is important that this is reflected in the retirement benefits of those helping to make the company successful.
Americans continue to face high unemployment, large federal and local government debts and global trade imbalance. With such an economic backdrop, the stock and debt markets are going to be volatile. Despite this, the markets have been resilient.
It is even more critical to properly diversify and respond market changes. We offer two asset allocation strategies: strategic and tactical asset allocation strategies (SAA and TAA for participants in Wal-Mart Profit Sharing and 401(k) Plan).
Strategic Asset Allocation is based on the well proven modern portfolio theory and its key features include: diversification, proper fund selection and periodically re-balancing.
Tactical Asset Allocation works on a diversified array of assets provided by funds in a plan and adjusts asset mixes based on market conditions such as asset price momentum utilized by TAA.
The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purposes, 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 Dec 7, 2010)
click to enlarge
Performance table (as of Dec 7, 2010)
|Portfolio Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|Wal-Mart Profit Sharing and 401(k) Plan Tactical Asset Allocation Moderate||9%||97%||7%||89%||8%||87%|
|Wal-Mart Profit Sharing and 401(k) Plan Strategic Asset Allocation Moderate||10%||110%||2%||14%||5%||38%|
|Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate||-3%||-26%||1%||9%||4%||29%|
|Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate||10%||67%||-0%||-4%||4%||14%|
We see that the plan outperforms our three asset class benchmark, but would underperform our four asset class benchmark.
Currently, asset classes in US Equity, emerging markets and real estate are doing well. Participants in this plan are only able to gain benefit from US equity.
The conclusion is that while Wal-Mart is a world leader, its retirement plan could be improved.