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MyPlanIQ.com is the only web application that offers advanced asset allocation strategies customized to a wide range of retirement and taxable investment plans such as 401(k), IRA and brokerage accounts. The unique key advantages of MyPlanIQ.com are 1. Superior investment strategies with high... More
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LTI Systems, Inc.
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  • New York Times -- How Plan Rating Stack up Against ETF Portfolios -- Part 1 0 comments
    Nov 2, 2010 2:26 PM | about stocks: SPY, VTI, EFA, VEU, EEM, VWO, AGG, BND, AOM, CIU, BIV, GWL, IDHQ, EFV, PID, DWM, TZD, TZE, TZG, TZI, TZO, TZL, TZV, IVV, IYY, IWV, VV, DLN, RSP, SCHX, IVW, IUSG, JKE, VUG, SPYG, QQQ, RPG, SCHG, IJR, IWM, JKJ, VB, SLY, PXSC, DES, SAA, UWM, SCHA, GMM, PXH, DEM, SCHE, NYT

    This is the first of three articles where we are going to examine how plan rating can be used to give you additional insight into the properties of a plan (collection of funds) and how they may perform going forward.We have previously examined News Corp's 401K plan. We found that while it was lacking in terms of diversity, it performed well within its scope -- beating the 3 Asset SIB with which it was comparable but losing out to the 4 Asset SIB.

    We will now look at the New York Times Company's 401K plan and establish it's performance before comparing the two and examining how each of their ratings gives insight as to their performance. All of MyPlanIQ's plans have ratings so this equally applies to any retirement, taxable, VA, 529 or any other sort of plan.

    The New York Times Company, a leading media company with 2009 revenues of $2.4 billion, includes The New York Times, the International Herald Tribune, The Boston Globe, 15 other daily newspapers and more than 50 Web sites, including NYTimes.com,Boston.com and About.com. The Company's core purpose is to enhance society by creating, collecting and distributing high-quality news, information and entertainment.

    The New York Times 401K plan consists of 23 funds. These funds enable participants to gain exposure to 4 major assets: US Equity, Foreign Equity, Emerging Market Equity, Fixed Income. The list of minor asset classes covered:
     

    Asset Class Ticker Name
    Intermediate-Term Bond DODIX Dodge & Cox Income
    Foreign Large Value DODFX Dodge & Cox International Stock
    SMALL BLEND LRSCX Lord Abbett Small-Cap Value A
    LARGE GROWTH PNOYX Putnam New Opportunities Y
    Emerging Markets EMF Templeton Emerging Markets Fund
    LARGE BLEND VFINX Vanguard 500 Index Investor
    Moderate Allocation VAARX Vanguard Asset Allocation Adm
    LARGE GROWTH VHCOX Vanguard Capital Opportunity
    Foreign Large Blend VWIGX Vanguard International Growth
    Target Date 2000-2010 VTOVX Vanguard Target Retirement 2005
    Target Date 2000-2010 VTENX Vanguard Target Retirement 2010
    Target Date 2011-2015 VTXVX Vanguard Target Retirement 2015
    Target Date 2016-2020 VTWNX Vanguard Target Retirement 2020
    Target Date 2021-2025 VTTVX Vanguard Target Retirement 2025
    Target Date 2026-2030 VTHRX Vanguard Target Retirement 2030
    Target Date 2031-2035 VTTHX Vanguard Target Retirement 2035
    Target Date 2036-2040 VFORX Vanguard Target Retirement 2040
    Target Date 2041-2045 VTIVX Vanguard Target Retirement 2045
    Target Date 2050+ VFIFX Vanguard Target Retirement 2050
    Retirement Income VTINX Vanguard Target Retirement Income
    LARGE BLEND REASX Russell U.S. Core Equity I
    CASH CASH Money Market

    Summary
    US Equity                 6 funds
    International Equity  2 funds
    Emerging Markets  1 fund
    Fixed income           1 fund
    Target date            11 funds

    If we exclude the target date funds as they can't be used to build a portfolio as they are a portfolio in and of themselves, there are ten funds, six of which are US based.

    As of Oct 29, 2010, this plan investment choice is rated as 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 average (64%)
    Fund Quality -- Rated as great (90%)
    Portfolio Building -- Rated as below average (31%)
    Overall Rating: average (59%)

    The rating shows the lack of funds to really build a portfolio and that although there are four asset classes, two of them, most notably Fixed income, only have one fund each.

    The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies (SAA and TAA both provided by MyPlanIQ). For comparison purpose, we also include the moderate model portfolios of a typical 4 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
    Emerging Market Equity EEM or VWO
    Fixed Income AGG or BND

    Performance chart (as of Oct 29, 2010)

    Performance chart (as of Nov 1, 2010)

    Performance table (as of Nov 1, 2010)

    Portfolio Name 1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
    THE NEW YORK TIMES COMPANIES SUPPLEMENTAL RETIREMENT AND INVESTMENT PLAN Tactical Asset Allocation Moderate 10% 85% 7% 62% 13% 114%
    THE NEW YORK TIMES COMPANIES SUPPLEMENTAL RETIREMENT AND INVESTMENT PLAN Strategic Asset Allocation Moderate 14% 135% 1% 2% 7% 44%
    Four Core Asset ETF Index Funds Emerging Markets Tactical Asset Allocation Moderate 4% 36% 4% 34% 14% 90%
    Four Core Asset ETF Index Funds Emerging Markets Strategic Asset Allocation Moderate 13% 98% 0% -0% 8% 37%

     

    The results are mixed in the sense that the NYT portfolios outperform the SIBs in the one and three year categories but underperform the SIBs in the five year categories. The choice of multiple funds in the US and international equity categories will allow for styles rotation to find higher returns. However, in the other major categories there are only single options and the benefits of low fees and market index performance in the SIBs allow it to deliver higher performance.

    To summarize having a four asset class portfolio is good. The number of funds in the plan is misleading as the target date funds don't assist in building a portfolio -- if you are a believer in target date funds then you have lots of choices. To further improve the portfolio, it is important to increase the fixed income choices immediately and then balance out emerging market choices from the US choices.

    In the next article we will compare News Corp and New York Times to see how the plan rating numbers give insight to the quality of the overall plan.


     




    Disclosure: No Positions
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