The Callan DC Index™
Performance, asset allocation, and cash flows of over 90 large defined contribution plans representing approximately $140 billion in assets are tracked in the Callan DC Index™.
DC Plans Endure Significant Declines in the Third Quarter
The Callan DC Index™ declined 5.82% in the third quarter of 2015, reflecting widespread losses in global equity markets. Uncertainty over U.S. monetary policy and concerns over slowing growth in China drove global stock markets lower. The broad U.S. market struggled and finished the quarter down 6.44% as measured by the S&P 500 Index. U.S. fixed income advanced modestly (Barclays Aggregate Index: +1.23%) as many investors took risk off the table.
According to the Callan DC Index™, the typical defined contribution (DC) plan trailed defined benefit (DB) plans by 1.83% in the third quarter of 2015. This is primarily because DC plans have little exposure to longer-term fixed income. Meanwhile, the average 2035 target date fund fared even worse—declining 7.34%—reflecting its higher allocation to equities (78% average allocation).
Since the Index’s inception in 2006, the average corporate DB plan has outperformed DC plans by 80 basis points annually. Conversely, target date funds (as measured by the Average 2035 Fund) have underperformed both DB and DC plans since inception.