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Asset Allocation: Age Matters

How much more conservative are older investors than younger investors? Dramatically so, according to Eileen Leonardi, Fidelity vice president and group leader for managed income.

Speaking to the 1999 SVIA National Forum in Washington, D.C., Leonardi reported that among the 5.9 million participants in 401(k) accounts which are custodied with Fidelity Investments, those participants 65 and older have 30% of their assets allocated to stable value funds, while 20 year olds have only 5% allocated to stable value.

Given that the American population is aging-a phenomenon outlined at the Forum by demographics expert Mark Goldstein-this asset allocation bias should work in favor of the stable value industry for many years to come. Other statistics compiled by Leonardi suggest that it might already be happening:

• While net transfers into and out of stable value funds in Fidelity managed 401(k) plans were negative from 1994 through 1997, they turned positive in 1998 and 1999.
• The rate of new contributions to stable value plans fell steadily from 1995 through 1998, but that figure has turned up so far this year.

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