Exxon Mobile -- Top Oil Company --Bottom 401K Plan
Exxon Mobil uses innovation and technology to deliver energy to a growing world. They explore for, produce and sell crude oil, natural gas and petroleum products. The company has, operating facilities or markets products in most of the world’s countries and explore for oil and natural gas on six continents.
We report on their 401(K) plan. Certainly these large, profitable companies may have a range of retirement benefits and this is one aspect. However, this is the employees retirement money and the better the plan, the better the returns.
This plan is based on the Summary Plan Description and Prospectus provided by ExxonMobil. Their 401K plan consists of 7 funds. These funds enable participants to gain exposure to 3 major assets: US Equity, Foreign Equity, Fixed Income.
| Asset Class | Ticker | Name |
|---|---|---|
| LARGE BLEND | VFINX | Vanguard 500 Index Investor |
| MID-CAP BLEND | VEXMX | Vanguard Extended Market Idx Inv |
| Foreign Large Blend | EFA | iShares MSCI EAFE Index |
| Intermediate-Term Bond | AGG | iShares Barclays Aggregate Bond |
| ROOT | CASH | CASH |
| Short-Term Bond | VBISX | Vanguard Short-Term Bond Index Inv |
| Moderate Allocation | VBINX | Vanguard Balanced Index Inv |
The list of minor asset classes covered:
Foreign Large Blend: EFA, VEU, GWL, PFA
Intermediate-term Bond: AGG, CIU, BIV, BND
Large Blend: IVV, IYY, IWV, VTI, VV, SPY, DLN, RSP, SCHX
Mid-cap Blend: IJH, IWR, JKG, VO, MDY, EMM, PJG, DON, EZM, MVV
Moderate Allocation: AOM
Short-term Bond: CSJ, BSV, VCSH
| Asset Class | Number of funds |
|---|---|
| REITs | 0 |
| Balanced Fund | 1 |
| Fixed Income | 2 |
| Commodity | 0 |
| Sector Fund | 0 |
| Foreign Equity | 1 |
| Emerging Market Equity | 0 |
| US Equity | 2 |
| Other | 1 |
| Total | 7 |
As of Jan 19, 2011, this plan investment choice is rated as below 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 below average (32%)
Fund Quality -- Rated as above average (71%)
Portfolio Building -- Rated as poor (7%)
Overall Rating: below average (34%)
The company recently upgraded their plan to include two more funds which drove the rating from 21% to 34%. Although 34% isn't great, they have made an improvement.
The use of good index funds is a point in their favor but the lack of asset classes and choice in funds make for a poor overall rating. The recent upgrade added a second bond fund which is an improvement but the funds are still meagre.
As we exit 2010 which was an outstanding year for US (and other equities) we may forget the gut wrenching turbulence of two to three years ago. It's important to have a plan with funds that will provide downside protection as well as capturing upside gains.
In this market it is even more critical to properly diversify and respond market changes. MyPlanIQ offers two asset allocation strategies: strategic and tactical asset allocation strategies (SAA and TAA for participants in Exxon Mobil Savings Plan).
The chart and table below show the historical performance of moderate model The chart and table below show the historical performance of moderate model portfolios employing strategic and tactical asset allocation strategies. For comparison purpose, 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 Jan 19, 2011)
Performance table (as of Jan 19, 2011)
| Portfolio Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Exxon Mobil Savings Plan Tactical Asset Allocation Moderate | 3% | 25% | 5% | 56% | 7% | 62% |
| Exxon Mobil Savings Plan Strategic Asset Allocation Moderate | 9% | 66% | 1% | 3% | 3% | 9% |
| Three Core Asset ETF Index Funds Tactical Asset Allocation Moderate | -2% | -23% | 2% | 20% | 4% | 33% |
| Three Core Asset ETF Index Funds Strategic Asset Allocation Moderate | 10% | 73% | 3% | 14% | 4% | 16% |
Currently Commodities, US Equity and Real Estate are doing well. Only US Equity is available to Exxon Mobil Savings Plan participants.
Over the longer term, this plan beats the three asset benchmark by virtue of the US asset class choices. In the short term, it falls below the benchmark. In some ways, it is close to the benchmark plan because of the lack of choices.
If would be a stronger plan with more fixed income choices and an additional asset class. To date, this plan comes at the bottom of the list based on returns.
To summarize, Exxon Mobil may offer employees a range of retirement benefits outside the 401K plan. However, it would be easy to improve the returns of this current plan. A lot of money is spent in administering this plan and it seems likely that the company could receive more bang for its buck.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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