Blog

“What’s In My Target Date Fund?” Isn’t The Only Question That Needs To Be Asked About TDFs

Given the large amounts of money flowing into target date funds, more effort by plan sponsors and participants should be devoted to understanding the methodology that the managers of the funds are using to manage the “glide path” of the fund.  The reason that TDFs are so popular is because of the belief that these are “set it and forget it” funds that the underlying managers are taking care...

Using Managed Accounts as Qualified Default Investment Alternatives (QDIAs)

Target Date Funds have long dominated the 401(k) Qualified Default Investment Alternatives world, but that could begin to change as participant’s financial situations become too complex for simple TDFs, and as competition drives down the fees of managed accounts. Managed accounts, while charging higher fees, allow for the use of ETFs, broader asset class allocation, and can offer a more holistic option for participants, taking into account other investments,...

Largest University Endowments Afford Their Schools Competitive Advantage

A recent article by CNBC economics reporter John W. Schoen provides an in-depth look into reasons behind the rising cost of higher education in the U.S. It’s a complicated issue, with many moving parts. The after-effects of the 2008 recession, expanding student services, required budgetary expansion in state budgets, such as pensions, healthcare and Medicaid, and other issues have forced schools to increase the student tuition costs. The improved...

Supreme Court Expands Fiduciary Responsibilities for Plan Sponsors

In a far-reaching unanimous ruling issued today, the Supreme Court ruled in favor of participants in employee retirement plans who sued claiming that the plan sponsors violated their fiduciary duty by including higher cost “retail class” funds instead of identical investments with lower cost “institutional shares” open only to institutional investors.  The ruling (Tibble v. Edison International, 13-550) overturns a lower court’s ruling that was dismissed that the employee...

Global ETF/ETP Assets Forecast to Surpass Hedge Funds During Second Quarter

According to ETFGI, global assets in ETFs/ETPs are expected to exceed those in hedge funds.  At the end of the first quarter, ETFGI estimates that hedge funds contained just $13 billion less than ETFs/ETPs globally.  In Q1 alone, ETFs/ETPs gained $US96 trillion, compared to just US$18 trillion for hedge funds. Reasons for this growth include an “expanding toolbox of index exposures to various markets and asset classes, including hedge...

Insurers Warming Up To ETFs in Fixed Income and Alternatives Space

A recent article on ETF.com indicates that insurance companies are beginning to consider ETFs, especially for their fixed income allocations, which typically can make up a large portion of an insurer’s investment portfolio in their general account. Fixed income ETFs offer some advantages over individual bonds, primarily liquidity and lower spreads. ETFs also helps insurance companies reduce the number of holdings in their portfolio while replicating their existing bond...

8 Myths of Collective Investment Trusts

BenefitsPro has published an article written by Marlene Satter covering the 8 Myths of Collective Investment Trusts (CITs).  The 8 myths are: Myth 1: CITs are exactly like mutual funds. Myth 2: CITs have a lower level of regulatory oversight than mutual funds. Myth 3: Undocumented CITs lead to uninformed decisions. Myth 4: High account minimums put them out of reach for all but large plan sponsors.  (Most CITs,...

Excessive Fee Lawsuit To Affect Retirement Plans

The ongoing litigation in Tibble vs. Edison reached the Supreme Court recently in a dispute over the high cost of retail mutual fund share classes in 401(k) plan when lower cost institutional share classes were available.  The defendants argue that the statute of limitations alleging the fiduciary breach had expired. The case serves as a reminder that Plan fiduciaries should review plan investments each year to see if there...

ETF.com Award Winners Announced

ETF.com announced its 2014 award winners at its annual banquet held in New York City on Thursday.  Endowment IndexTM calculated by Nasdaq OMX® was a finalist for Index of the Year.  The Index of the Year award went to the Bloomberg U.S. Dollar Spot Index. Other category winners included: ETF of the Year: Wisdom Tree Europe Hedged Equity Fund (HEDJ) Best New ETF for 2014: Market Vectors China AMC...

Collective Investment Trusts for 401(k) Plans Becoming More Popular

A recent article titled “US Mutual Funds Cut Expenses by Shifting Billions To Trusts” discusses  the growing use of Collective Investment Trusts (also known as Collective Investment Funds, CITs or CIFs) based upon their lower cost structure.  A few excerpts: Assets in CITs are surging because they can have significantly lower overhead costs than the average mutual fund. CITs can only be offered to qualified retirement plans such as 401(k)s...