Retirement Assets In Mutual Funds Decline
Retirement assets placed in mutual funds through individual retirement accounts (IRAs) and defined-contribution plans such as 401(k)s declined 2% in 2000 to $2.4 trillion, according to the Investment Company Institute.
The decline reflected weakness in the U.S. and foreign equity markets, the Washington, D.C.-research firm said in a report released in June.
During 2000, an estimated $115 billion in new cash flowed into mutual funds held in retirement accounts, but that amount was offset by the negative market performance, the report said. Nonetheless, mutual funds‚ share of the $11.5 trillion of assets held in U.S. retirement plans held steady at 21%, and the share of total mutual fund assets held through retirement accounts stayed near one-third for the seventh consecutive year.
ICI also found that retirement-account flows composed about one-third of total mutual fund industry flows in 2000. Long-term funds received $118 billion of inflows from retirement accounts in 2000–compared with $117 billion in inflows in 1999–while money-market funds had $2 billion of net outflows, compared with $23 billion in inflows in 1999.
Equity fund net inflows from retirement accounts in 2000 were $141 billion, while bond and hybrid funds had outflows of $23 billion.
U.S. retirement assets almost tripled during the 1990s, with IRAs enjoying the fastest growth, ICI said. The IRA share of the retirement market rose to 23% in 2000 from 16% in 1990.
More Companies Offer Direct Access Notes
A low-priced bond product tailored for individual investors is growing in popularity.
Direct Access Notes, or DANs, are original-issue bonds distributed through brokers. They‚re sold at par in increments as little as $1,000. By contrast, corporate bonds sold in the secondary market typically come in $10,000 increments, and you buy those securities at a discount or premium.
DANs have been around for five years, since GMAC in 1996 first issued for the retail market debt it called Smart Notes. But in recent months, a handful of other well-known corporations have issued their own version of these fixed-income instruments.
Today, you can also purchase DANs from Fannie Mae, Freddie Mac, UPS, the Tennessee Valley Authority and Caterpillar Finance. All carry ratings between A and AAA.