Quarterly TDFs Commentary
9/30/2013-Combining “to” and “through” TDFs for all vintages, the average TDF (2010-2050) earned about 5% for the quarter, 10% YTD and 12% for the trailing year. During the same period, the S&P 500 also earned about 5% for the quarter, but a more robust 20% YTD and 19% for the trailing year. The BarCap US Agg Bond Index earned 0.6%, -1.9% and -1.7% for the same periods. The near term (2015) TDFs underperformed the far dated (2045) TDFs by 3 percentage points during the 3rd quarter, 8 percentage points YTD and 9 percentage points for the trailing year. For the trailing year, the average 2015 TDF earned about 7% while the average 2045 TDF earned about 16%. The spread between the best and worst performing 2015 TDF was about 5 percentage points for the quarter, 11 percentage points YTD and 12 percentage points for the trailing year. The spread between the best and worst performing 2045 TDF was about 5 percentage points for the quarter, 14 percentage points YTD and 15 percentage points for the trailing year. The average 2015 TDF underperformed the S&P 500 by 1.5 percentage points for the quarter, 14 percentage points YTD and 12 percentage points for the trailing year. The average 2045 TDF outperformed the S&P 500 by 1.5 percentage points for the quarter, but underperformed by 6 percentage points YTD and 3 percentage points for the trailing year.
Quarterly Asset Class Commentary
9/30/13-Opting not to tighten monetary policy, the Fed’s surprise sparked a global equity rally, particularly in the developed markets. US Equities reached new highs while Emerging Markets were mixed, particularly India. With the exception of the Long Government, most bond categories generated positive returns during the 3rd quarter, including TIPS. Emerging Market Bonds recovered during September, but ended up flat for the quarter. After climbing to nearly 3.00%, the 10-year Treasury yield ended the quarter at 2.65%. With the exception of Real Estate and Utilities, US equity sectors generated positive returns. Health and Technology were among the top performing sectors. Precious Metals and Natural Resources were up about 10% for the quarter while Energy gains were less tepid. Commodity returns were positive during the quarter, but continue to trail other sectors. For the 1, 3 & 5 year periods, Commodities remain among the worst performing asset classes. Domestic and International Small Growth led the equity rally. The Russell 2000 was up about 10.2% for the quarter, almost twice the pace of the 5.2% generated by the S&P 500. US Equity mutual fund flows remain positive for the quarter, but turned negative during September. International Equity flows continue to dominate the equity category while the bond rotation favors non-traditional holdings. ETF flows continue to exceed mutual fund flows, primarily US & International Equities.