As investments they outpace money markets by almost 3 to 1
A close look at boomer executives’ investment choices reveals a striking preference for large cap stocks. And, contrary to conventional wisdom, young boomers favor investments that are safer than those of their elder peers.
These were among the key findings of a survey released this month by Clark Consulting, a Barrington, Ill.-based executive compensation and benefits consulting firm. Titled “Executive Retirement Report–The Baby Boomer Edition,” the study concluded that large cap stocks comprise nearly 37% of all assets invested by boomer execs in nonqualified retirement plans. Money markets were a distant second at 13.2%, while fixed income was just behind with 12.7% of total assets measured.
The report additionally revealed an overwhelming preference for U.S. stocks. Of the 9 asset classes measured, “foreign” and “world” equities accounted for just 6.7% and 1.3%, respectively, of the total.
“The boomers who now dominate the executive population have a high degree of confidence in the U.S. economy,” says Ted Disabato, a chief investment officer for Clark Consulting. “Their investments reflect that sentiment.”
While there were consistencies in investment choices for all boomer executives, the report found some differences in investment strategies or asset class choices based on age. The report looked at the executives in three age categories: those born 1946-1951; those born 1952-1958; and the youngest of the boomers born between 1959 and 1964.
Large cap stocks were the most popular of assets measured, with the oldest group placing nearly 40% of their assets in that class (39.5%). Middle boomers allocated 35.9% of their assets to large cap stocks, and the youngest group had 35.0% of their assets allocated to large caps.
According to the report, the second and third most popular asset classes varied by age group, but fixed income, small caps and money markets were the favorites with boomers.
For the eldest group of boomers, the second and third most popular asset classes were fixed income (14.1%) and small caps (10.7%). For middle boomers, small caps were also the third most popular, with 12.9% of assets measured. However, second-place money markets barely edged small caps (13.4%) by fewer than 60 basis points.
The youngest boomers differed from their elders; small caps were not in their top three measured assets. Instead, they selected money markets (17.3%) and fixed income (11.2%).