What We're Thinking.

For over a decade, the consultant’s and communication specialist’s refrain has been “keep your investment menus compact; having too many investment options confuses participants”. It’s become another in a collection of reflexive sayings that are repeated without real thought. In this case, while the advice may be good, the usual reasoning is questionable. A compact investment menu is indeed, often, a good thing, but not necessarily for the reasons most advocates provide. In this article, we look at the history of the recommendation and its current utility.

As part of our review of a client's IPS, we examined the investment policy statements of over 50 governmental and higher education plans for comparison. We thought we'd pass along the most common mistakes we found.

The White House has repeatedly warned that the Russian government may be exploring launching cyberattacks against U.S. critical infrastructure. In 2021, the Department of Labor (DOL) refreshed its cybersecurity guidance for plan sponsors, fiduciaries, service providers, and participants. We’ll review the threat, the DOL’s guidance, and offer some thoughts of our own.

Russia’s disastrous invasion of Ukraine has led to the shutdown of the Russian equity market. The Moscow Exchange is closed, and London and New York exchanges have halted trading of depositary receipts of Russian firms. As Russian equities have become untradable, MSCI and FTSE Russell have taken steps to remove Russia from their standard indexes.

The headlines say that inflation is at it’s highest point since 1981, but headlines don’t do the curious many favors. While inflation has been widely distributed across expenditure categories over the last 12 months, the sharpest jolts have been focused both in affect and time period. Take a look at our highlights for a little more background.

Back in June of 2020, the Department of Labor issued an information letter indicating that ERISA doesn’t prohibit the use of private equity investments in qualified defined contribution plans. We noted then that media and industry reaction barbelled between “the wolves are at the door” and “the playing field has been leveled.”

As one might have predicted, the letter motivated some strong “stakeholder” reactions. In a new supplemental statement, the DOL has clarified some of what they were trying to say.

Of the risks that retirement investors face (and the challenges that confront target-date managers and other asset allocators), inflation is among the most pernicious. Plan fiduciaries can choose from several anti-inflation “tools” to populate plan menus, but following conventional thought in selecting and using those tools can be counterproductive.

Bloomberg Barclays fixed income benchmarks rebranded as the “Bloomberg Indices” on August 24. Sponsors will see the change in their 3rd quarter investment reviews. Most sponsors will recognize this branding change via the Bloomberg US Aggregate Bond Index.

A decade ago, the Lazard Emerging Markets Fund held assets of over $18 billion. At the end of the first quarter of 2021, assets had dropped to $4.3 billion. We provide some thoughts for sponsors trying to decide to stay or go.

Plan sponsors (and their consultants) have grown more sophisticated in their decision-making regarding the hiring and firing of investment managers over the last 20 years. However, fund cash flow and liquidity, which are far more likely to present an immediate emergency to a retirement plan than underperformance or a manager change, remain under-monitored or ignored by many DC consultants and investment committees.

Unfortunately, acting like a good fiduciary doesn't always mean so much if you can't demonstrate that you did it. Not only is appropriate documentation of a committee’s meetings and decisions crucial preparation for the possibility of an audit or lawsuit, but it serves plan fiduciaries in more everyday ways as well. Documentation is a critical yet often neglected discipline.

Since 2013, the volume of ERISA class action lawsuits against 401(k) plan fiduciaries has risen dramatically. In particular, cases alleging “excessive fees” have blossomed into the main driver of the increase. Nearly 100 new cases claiming breaches of fiduciary duty in connection with plan fees were initiated in 2020.

In August of 2020, we looked at how certain stocks’ strong relative performance had led to unprecedented concentration in certain market indices, notably those representing US and ex-US large-cap equities. Naturally, we focused on the impact on index funds. More often than not, however, index composition affects investors in actively managed strategies, as well.

In June of 2020, the Department of Labor issued an Information Letter indicating that ERISA doesn’t necessarily prohibit the use of private equity investments in ERISA-qualified defined contribution plans. The media and industry reaction seemed to barbell between “the wolves are at the door” and “the playing field has been leveled.”

Is the opening of 401(k)s to private equity a release of bloodthirsty Wall Street hounds, or is it a gift of fire from the investment gods? Probably neither.

Already one of the most aggressive target date series, T. Rowe Price is increasing the equity allocation at both the early and later ends of the Retirement series glide path.

Passed in December 2019 after much bi-partisan effort, the Setting Every Community Up for Retirement Enhancement (SECURE) Act includes reforms intended to increase access to workplace plans and expand retirement savings. The Act’s passage will impact defined contribution (DC) plans, as well as defined benefit (DB) plans, individual retirement accounts (IRAs), and 529 plans.

The following is a summary of key provisions that will impact sponsors of defined contribution plans.

For over a decade, the consultant’s and communication specialist’s refrain has been “keep your investment menus compact; having too many investment options confuses participants”. It’s become another in a collection of reflexive sayings that are repeated without real thought. In this case, while the advice may be good, the usual reasoning is questionable. A compact investment menu is indeed, often, a good thing, but not necessarily for the reasons most advocates provide. In this article, we look at the history of the recommendation and its current utility.

Plan sponsors always want to know how market turmoil is affecting participant behavior. As in many situations, the answers they get are often based on conventional wisdom that isn’t always wise. Case in point: take a look at these results from Ning et.al.’s study on participant trading in the 2008-2009 Financial Crisis to see what your participants may be up to this time around.

Passed in December 2019 after much bi-partisan effort, the Setting Every Community Up for Retirement Enhancement (SECURE) Act includes reforms intended to increase access to workplace plans and expand retirement savings. The Act’s passage will impact defined contribution (DC) plans, as well as defined benefit (DB) plans, individual retirement accounts (IRAs), and 529 plans.

The following is a summary of key provisions that will impact sponsors of defined contribution plans.

For over a decade, the consultant’s and communication specialist’s refrain has been “keep your investment menus compact; having too many investment options confuses participants”. It’s become another in a collection of reflexive sayings that are repeated without real thought. In this case, while the advice may be good, the usual reasoning is questionable. A compact investment menu is indeed, often, a good thing, but not necessarily for the reasons most advocates provide. In this article, we look at the history of the recommendation and its current utility.

For over a decade, the consultant’s and communication specialist’s refrain has been “keep your investment menus compact; having too many investment options confuses participants”. It’s become another in a collection of reflexive sayings that are repeated without real thought. In this case, while the advice may be good, the usual reasoning is questionable. A compact investment menu is indeed, often, a good thing, but not necessarily for the reasons most advocates provide. In this article, we look at the history of the recommendation and its current utility.