Samsung (OTC:SSNLF) is an aggressive and innovative company. Samsung Electronics Co., Ltd. engages in the manufacture and sale of semiconductors, LCDs, telecommunication products, and digital media products. It has operations in Korea, the Americas, Europe, Asia, and China. The company was founded in 1938 and is based in Seoul, South Korea.
Their 401K plan is one of the best we have seen and demonstrates employee concern. This report reviews the Samsung 401K plan. We will discuss the investment choices and present our plan rating.
Plan Review and Rating
Samsung 401K's plan consists of 33 funds. These funds enable participants to gain exposure to 5 major assets: US Equity, Foreign Equity, Emerging Market Equity, REITs, Fixed Income.
Number of funds
With 11 target date funds, there are plenty of alternatives for those who don't want to mess with investments, but there is also plenty of upside for those who do.
The list of minor asset classes covered:
Diversified Emerging Mkts: EEM, GMM, PXH, DEM, SCHE
Equity Precious Metals: DBP
Foreign Large Blend: EFA, VEU, GWL, PFA
Global Real Estate: IFGL, RWX
High Yield Bond: HYG, JNK, PHB
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
Large Value: IVE, IWW, JKF, VTV, ELV, PWV, RPV, SCHV
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Mid-cap Growth: IJK, IWP, VOT, EMG, PWJ, RFG, UKW
Mid-cap Value: IJJ, IWS, JKI, VOE, EMV, PWP, RFV, UVU
Natural Resources: IYM, IGE, VAW, XLB, XME, PYZ, DBN, RTM, UYM
Short Government: SHY, SHV, VGSH, PLK, USY
Small Blend: IJR, IWM, JKJ, VB, DSC, PJM, DES, SAA, UWM, SCHA
Small Growth: IJT, IWO, JKK, VBK, DSG, PWT, RZG, UKK
Small Value: IJS, IWN, JKL, VBR, DSV, PWY, RZV, UVT
Target Date 2000-2010: TZD
Target Date 2011-2015: TZE
Target Date 2016-2020: TZG
Target Date 2021-2025: TZI
Target Date 2026-2030: TZL
Target Date 2031-2035: TZO
Target Date 2036-2040: TZV
Target Date 2041-2045:
Target Date 2050+:
As of Dec 13, 2010, this plan investment choice is rated as great 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 above average (80%)
Fund Quality -- Rated as great (97%)
Portfolio Building -- Rated as great (98%)
Overall Rating: great (92%)
Keys to the success of this portfolio:
- US funds ideal balance in terms of the number of range of choices
- Strong fixed income choices
- Five asset classes in total
Current Economic and Market Conditions
With the current market uncertainties with bonds and stocks going through continuous shifts, it is even more critical to properly diversify and respond to market changes.
The Samsung 401K plan is well positioned to provide strength in equities and fixed income classes and to provide a great platform for building a high performance portfolio.
Strategic Asset Allocation is based on well known 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 5 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
REITs: IYR or VNQ or ICF
Emerging Market Equity: EEM or VWO
Fixed Income: AGG or BND
Performance chart (as of Dec 13, 2010)
Performance table (as of Dec 13, 2010)
|Portfolio Name||1Yr AR||1Yr Sharpe||3Yr AR||3Yr Sharpe||5Yr AR||5Yr Sharpe|
|Samsung 401K Tactical Asset Allocation Moderate||10%||83%||11%||104%||14%||122%|
|Samsung 401K Strategic Asset Allocation Moderate||11%||118%||3%||15%||7%||43%|
|Five Core Asset Index ETF Funds Tactical Asset Allocation Moderate||9%||66%||7%||59%||14%||93%|
|Five Core Asset Index ETF Funds Strategic Asset Allocation Moderate||13%||102%||4%||15%||8%||35%|
The five asset SIB is one of the best performing benchmarks and over the long haul, the Samsung plan has beaten the benchmark although in recent months, the five core SIB has slightly outperformed the Samsung 401K plan.
Currently US Equity, Commodities and Emerging Market are doing well. US Equity and Emerging Markets are available to Samsung 401K participants.
In summary, Samsung is to be congratulated for putting together such a good plan for the US employees. Those who don't want to get involved with any investing decisions have several choices and those who want to get involved will certainly be rewarded for their efforts.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.