PCI's 401(k) Investment Lineup vs. Passive Scorecard Annual Report

About

PCI’s 401(k) Investment Lineup vs. Passive Scorecard (ILPS) answers the question ‘Do 401(k) investment lineups outperform all-index lineups?’

Annually, PCI sponsors research examining whether investment options in Defined Contribution (DC) Plans, such as 401(k)s, perform better than similar market indices. It indicates whether the funds included in 401(k) lineups benefit retirement plan participants, compared to if they were invested in the corresponding and relative index.

This information is crucial for a nation relying on DC plans as the primary means for its workers’ retirement.

This research is conducted annually by Dr. Rui Yao, Ph.D., CFP®, Professor and Director of Graduate Studies of Personal Finance Planning at the University of Missouri.

The update reporting 2021’s findings is now available. Access the full results in 401(k) Investment Lineup vs. Passive Scorecard report by submitting the form. 

Download the 401(k) Investment Lineup vs. Passive Scorecard Report

This Years Findings

38.87% of plans outperformed an all-index lineup in 2021.

The results from the latest update for the 2021 year at the plan level show that 38.87% of plans achieved a higher expected return than an all-index lineup. When adjusting for risk, the average of plans that outperformed was only 13.58%. Generally, the percentage of plans that outperformed their benchmark plan as measured by expected return was higher for plans with a smaller market value. 45.03% of plans with a market value of $1-10 million outperformed their benchmark, the highest among all categories. Only an average of 29.51% of the largest plans with a market value of $500 or more outperformed their benchmark, the lowest among all size categories.

Percentage of Defined Contribution Plans Outperforming an All-Index Lineup on a Year-By-Year Basis.

38.87%

2020

75.51%

2019

25.07%

2018

27.86%

2017

82.66%

2016

10.59%

2015

30.48%

2014

11.96%

2013

31.67%

The data consisted of four categories of retirement plans of various sizes based on their market values, $1 million to $10 million, $10-100 million, $100-500 million, and over $500 million. This sample is representative of its underlying plan population, which are audited plans with at least one million dollars in plan assets and have at least three mutual funds that are not a money market fund. One fund only had return data for 1 month during the past 12 months and was excluded from the entire analysis. Affected plans were treated as if they did not have such fund in their lineup. Forty-one funds had return data between 2 and 11 months; they were included for the fund-level analysis but excluded from the plan-level analysis. This sample selection affected 54 plans but only led to the deletion of 1 plan in the smallest size category from the plan-level analysis. The final sample size was 5,000 for the fund-level analysis and 4,999 for the plan-level analysis.

The report evaluates performance both at the individual fund-level as well as the overall plan level.

The report considers several methods for determining if a fund outperforms its assigned index during a calendar year.

 

● Table 1 reports the number of the total population and the sample of each fund size category.
● Table 2 reports the mean ratio of funds in plans that outperformed their benchmark.
● Table 3 reports the percentage of plans in general and in each size category that outperformed their benchmark.

 

The performance measures five panels of analysis for both the fund level and the plan level. The panels include higher expected return, lower risk (standard deviation), higher Sharpe ratio, lower downside risk, and higher Sortino ratio.

This Years Findings

38.87% of plans outperformed an all-index lineup in 2021.

The results from the latest update for the 2021 year at the plan level show that 38.87% of plans achieved a higher expected return than an all-index lineup. When adjusting for risk, the average of plans that outperformed was only 13.58%. Generally, the percentage of plans that outperformed their benchmark plan as measured by expected return was higher for plans with a smaller market value. 45.03% of plans with a market value of $1-10 million outperformed their benchmark, the highest among all categories. Only an average of 29.51% of the largest plans with a market value of $500 or more outperformed their benchmark, the lowest among all size categories.

Percentage of Defined Contribution Plans Outperforming an All-Index Lineup on a Year-By-Year Basis.

38.87%

2020

75.51%

2019

25.07%

2018

27.86%

2017

82.66%

2016

10.59%

2015

30.48%

2014

11.96%

2013

31.67%

The data consisted of four categories of retirement plans of various sizes based on their market values, $1 million to $10 million, $10-100 million, $100-500 million, and over $500 million. This sample is representative of its underlying plan population, which are audited plans with at least one million dollars in plan assets and have at least three mutual funds that are not a money market fund. One fund only had return data for 1 month during the past 12 months and was excluded from the entire analysis. Affected plans were treated as if they did not have such fund in their lineup. Forty-one funds had return data between 2 and 11 months; they were included for the fund-level analysis but excluded from the plan-level analysis. This sample selection affected 54 plans but only led to the deletion of 1 plan in the smallest size category from the plan-level analysis. The final sample size was 5,000 for the fund-level analysis and 4,999 for the plan-level analysis.

The report evaluates performance both at the individual fund-level as well as the overall plan level.

The report considers several methods for determining if a fund outperforms its assigned index during a calendar year.

 

● Table 1 reports the number of the total population and the sample of each fund size category.
● Table 2 reports the mean ratio of funds in plans that outperformed their benchmark.
● Table 3 reports the percentage of plans in general and in each size category that outperformed their benchmark.

 

The performance measures five panels of analysis for both the fund level and the plan level. The panels include higher expected return, lower risk (standard deviation), higher Sharpe ratio, lower downside risk, and higher Sortino ratio.

This Years Findings

Data

Methodology

38.87% of plans outperformed their benchmark in 2021.

The results from the latest update for the 2021 year at the plan level show that 38.87% of plans achieved a higher expected return than an all-index lineup. When adjusting for risk, the average of plans that outperformed was only 13.58%. Generally, the percentage of plans that outperformed their benchmark plan as measured by expected return was higher for plans with a smaller market value. 45.03% of plans with a market value of $1-10 million outperformed their benchmark, the highest among all categories. Only an average of 29.51% of the largest plans with a market value of $500 or more outperformed their benchmark, the lowest among all size categories.

 

Percentage of Defined Contribution Plans Outperforming Their Benchmark on a Year-By-Year Basis.

38.87%

2020

75.51%

2019

25.07%

2018

27.86%

2017

82.66%

2016

10.59%

This Years Findings

Data

Methodology

The data consisted of four categories of retirement plans of various sizes based on their market values, $1 million to $10 million, $10-100 million, $100-500 million, and over $500 million. This sample is representative of its underlying plan population, which are audited plans with at least one million dollars in plan assets and have at least three mutual funds that are not a money market fund. One fund only had return data for 1 month during the past 12 months and was excluded from the entire analysis. Affected plans were treated as if they did not have such fund in their lineup. Forty-one funds had return data between 2 and 11 months; they were included for the fund-level analysis but excluded from the plan-level analysis. This sample selection affected 54 plans but only led to the deletion of 1 plan in the smallest size category from the plan-level analysis. The final sample size was 5,000 for the fund-level analysis and 4,999 for the plan-level analysis.

 

The report evaluates performance both at the individual fund-level as well as the overall plan level.

 

The report considers several methods for determining if a fund outperforms its assigned index during a calendar year.

 

● Table 1 reports the number of the total population and the sample of each fund size category.
● Table 2 reports the mean ratio of funds in plans that outperformed their benchmark.
● Table 3 reports the percentage of plans in general and in each size category that outperformed their benchmark.

 

The performance measures five panels of analysis for both the fund level and the plan level. The panels include higher expected return, lower risk (standard deviation), higher Sharpe ratio, lower downside risk, and higher Sortino ratio.

Use of Advisors and Retirement Plan Performance

View the original academic research paper that established the original methodology in the Journal of Financial Counseling and Planning, led by Dr. Yao, Ph.D., CFP®, and co-authored by Weipeng Wu, MA, Doctoral Student in Personal Financial Planning at the University of Missouri, and Cody Mendenhall, CFP®, Principal at PCI.

Previous Summaries By Year

2022 Study

Download last years report which covers:

2021 Study

Download last years report which covers:

2023

Download complete update for 2020’s research.

2022

Download complete update for 2019’s research.

2021

Download complete update for 2018’s research.

2020

Download complete update for 2016 and 2017’s research.

The Authors

Dr. Rui Yao, Ph.D., CFP®

(Lead Research and Author)

Professor and Director of Graduate Studies of Personal Finance Planning at the University of Missouri

Weipeng Wu, MA

(Co-Author)

Doctoral Student in Personal Financial Planning at the University of Missouri.

Cody Mendenhall, CFP®

(Co-Author)

Principal at Pension Consultants, Inc.

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