Study participants who selected their own investments tended to adopt risk strategies at the extremes of spectrum, did not reallocate and rebalance regularly and were insufficiently diversified
Boston– A study1 commissioned by John Hancock showed common investing behaviors amongst 401(k) participants that selected their own investments. As well, the study showed that a large majority of non-Lifestyle participants, 84.2%, would have fared better in a single risk-equivalent Lifestyle Portfolio than they fared by selecting their own investments. In the 10-year analysis (1997-2006), participants who had chosen to allocate all of their contributions to a single Lifestyle Portfolio earned, on average, 7.2% versus 5.3% for the non-Lifestyle participants. (For further information, please see John Hancock Press Release of September 2007.)2
Several investing behaviors of non-Lifestyle participants were identified that may explain the difference in returns. Non-Lifestyle investing participants, typically, were:
In contrast, John Hancock Lifestyle Portfolios are designed to provide diversification; professional portfolio managers reallocate and rebalance continuously; and participants’ risk profile is arrived at through a short six-question risk test.
“John Hancock’s asset allocation funds are designed to help participants save successfully,” said Ed Eng, Senior Vice President, Product Development. “Through these Portfolios, participants can avoid some of the common – and self-defeating – investing behaviors that the study identified. For John Hancock Lifestyle investors, the risk quiz is a quick and easy way to make sure a participant’s investment corresponds to their risk profile,” he said. “On average, our asset allocation funds have 16 different classes of investments. This is a level of diversification that would be very difficult for most individual investors to achieve,” he added.
This is the first time in its five-year history that the study analyzed the investing behavior of the non-Lifestyle participants. The study, run by Burgess + Associates for John Hancock, has consistently shown that the non-Lifestyle participants as a group fare worse than the Lifestyle participants.
JHRPS has seen its John Hancock Lifestyle Portfolios become a popular investment option in response to these and other concerns. They currently form almost half of funds under management.
Lifestyle Portfolios are professionally managed portfolios that reflect a particular objective and risk strategy. John Hancock, one of the first companies to offer Lifestyle Portfolios, today is one of the largest providers of lifestyle portfolios in the country (Strategic Insight as of December 31, 2006). More than 90% of JHRPS plan sponsors now offer John Hancock Lifestyle Portfolios.
A Lifestyle Portfolio ("Fund") is a "fund of funds" which invests in a number of underlying funds. The Fund's ability to achieve its investment objective will depend largely on the ability of the subadviser to select the appropriate mix of underlying funds and on the underlying funds’ ability to meet their investment objectives. There can be no assurance that either a Fund or the underlying funds will achieve their investment objectives. Diversification does not ensure against loss. Past performance is no guarantee of future results. A Fund might not meet its objective.
Current performance may be lower or higher than the performance data quoted. Investment returns and the value of a participant’s account will fluctuate and may be worth more or less than the original cost. There is no guarantee that any investment strategy will achieve its objective.
Please call 1-877-346-8378 to obtain John Hancock USA group annuity investment option Fund Sheets for its sub-accounts and prospectuses for the sub-accounts’ underlying mutual funds, which are available upon request. The prospectuses for the sub-accounts’ underlying mutual funds contain complete details on investment objectives, risks, fees, charges and expenses as well as other information about the underlying mutual funds which should be carefully considered.
About John Hancock and Lifestyle Portfolios
John Hancock is one of the nation’s leading providers of lifestyle portfolios, with $52.7 billion in Lifestyle Portfolio assets under management in its variable annuity, variable life, mutual funds and 401(k) products, as of June 30, 2007.
About John Hancock Retirement Plan Services
Among mutual fund, life insurance companies and banks, JHRPS is ranked as the #1 provider to 401(k)s based on number of 401(k) plans managed, according CFO Magazine. (CFO Magazine 401(k) Buyers Guide Study, published May 2007.)
About John Hancock and Manulife Financial
John Hancock is a unit of Manulife Financial Corporation (the Company), a leading Canadian-based financial services company serving millions of customers in 19 countries and territories worldwide. Operating as Manulife Financial in Canada and Asia, and primarily through John Hancock in the United States, the Company offers clients a diverse range of financial protection products and wealth management services through its extensive network of employees, agents and distribution partners. Funds under management by Manulife Financial and its subsidiaries were Cdn$410 billion (US$386 billion) as at June 30, 2007.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘0945’ on the SEHK. Manulife Financial can be found on the Internet at www.manulife.com.
The John Hancock unit, through its insurance companies, comprises one of the largest life insurers in the United States. John Hancock offers a broad range of financial products and services, including whole life, term life, variable life, and universal life insurance, as well as college savings products, fixed and variable annuities, long-term care insurance, mutual funds and various forms of business insurance.
Insurance products are issued by the following John Hancock insurance companies: John Hancock Life Insurance Company, John Hancock Variable Life Insurance Company*, John Hancock Life Insurance Company (U.S.A.)* and John Hancock Life Insurance Company of New York.
1The Burgess study was a commissioned study. This information is general in nature and is not intended to constitute legal or investment advice on any particular matter. Burgess + Associates and John USA are not affiliated.
2 Outcomes of Participant Investment Strategies 1997-2006 - Assumptions: The Burgess study examined the performance of portfolios of 200, 467 retirement plan participants from 2002-2006 for the 5 year study and 14,487 retirement plan participants from 1997-2006 for the 10 year study contributing to their employer’s defined contribution plans through an ARA group annuity contract issued by John Hancock USA. The Lifestyle group represents those participants that invested only in a single Lifestyle Portfolio throughout the period. The Non-Lifestyle group represents those participants who chose their own portfolio mix throughout the period. These two groups were segmented based on their age or the level of investment risk inherent in the allocation strategies they selected. All participants selected met all of the following criteria: had an ending balance that was greater than zero; did not have a negative cash flow; did not maintain a loan. The average rates of return referred to in the study are the internal rates of return earned on the group’s aggregated stream of cash flows, and does not necessarily represent the returns of any individual participant’s actual investment results.
*Not licensed in New York
SOURCE: John Hancock Retirement Plan Services
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