The structure of retirement plan investment menus continues to evolve, from "more choice is better" to "less is more". Many fiduciaries initially sought protection under ERISA §404(c) by offering a wide array of investment choices to their participants, but participants found themselves overwhelmed by the task of evaluating and selecting from amongst so many managers. Plan sponsors soon realized that less could be more, and built menus that offered a few fixed income options and a diverse set of a dozen or more stock funds, but in the bear market of 2008, many of those plans saw similar declines across their investment menu.
With an increasing number of plans utilizing automatic enrollment and QDIA, just providing adequate choice is no longer enough. Fiduciaries are again asking, what does an effective investment menu look like? In this presentation, we cover:
Incorporating the science of behavioral finance into your investment menu design;
Selecting appropriate asset classes;
Whether a tiered structure could be right for your plan;
Passive versus active investment options;
Options for low risk investments; and
When to use target date funds.
The Secrets to Long Term Investing Success - Session 1Bob Sloma
Learn the secrets to long-term investing success! In this seminar series Bob Sloma, MBA, Principal of Sigma Advantage, shares the investing process he developed in the mid-nineties to manage his own and his wife’s retirement investments. His process has consistently beaten the S&P 500 return on a three, five and ten year basis, making changes only once a year, with between two-thirds and three-quarters of the market’s risk!
The Secrets to Long Term Investing Success - Session 1Bob Sloma
Learn the secrets to long-term investing success! In this seminar series Bob Sloma, MBA, Principal of Sigma Advantage, shares the investing process he developed in the mid-nineties to manage his own and his wife’s retirement investments. His process has consistently beaten the S&P 500 return on a three, five and ten year basis, making changes only once a year, with between two-thirds and three-quarters of the market’s risk!
Authors John Paglia and Robert Slee offer an alternative to using methodology designed for privately-trade companies as a means to valuate privately-traded companies. The article was originally published in the May/June 2011 issue of The Value Examiner. It is provided courtesy of The National Association of Certified Valuators and Analysts (http://www.nacva.com)
2017-01-25 A Framework for Strengthening Your Nonprofit’s Investment Reserve ...Raffa Learning Community
Nonprofit Executives and their Boards know they must periodically review reserve or investment policies. They don’t always know, however, what’s involved. Through his work on the Study on Nonprofit Investing (SONI), Dennis Gogarty of Raffa Wealth Management has developed an easy-to-follow investment policy framework which will assist nonprofits in developing or strengthening their organization’s policy and procedures.
Merlin released our latest white paper today entitled, Understanding Investor Due Diligence. This white paper reviews the entire investor due diligence process covering all the qualitative and quantitative aspects that are important to investors today. I hope you find this helpful and please let me know if you have any questions.
This white paper reviews the entire investor due diligence process covering all the qualitative and quantitative aspects that are important to investors today. It assists hedge fund manager’s clients to better prepare them for their capital raising mandates.
Entrepreneurs and investors must both understand the critical aspects of valuation for pre-revenue
and startup entrepreneurial ventures. By aligning expectations, such understanding fosters positive,
productive relationships between funders and founders. In addition, investors and entrepreneurs
benefit separately when they know the answers to essential questions. What are the most important
factors angel investors should consider in determining a company’s value? How can entrepreneurs
better present their companies to attract early-stage investors and build effective relationships?
“Investment Valuations of Seed- (Startup) and Early-Stage Ventures” by Luis Villalobos, founder of Tech
Coast Angels, defines perspectives from which investors and entrepreneurs view valuation and provides
insights that can reduce the natural contentiousness of negotiating valuation.
Founding vs Professional CEO Performance Analysis in SaaSYujin Chung
Research cited
For more info, check out my class blog (http://opim.wharton.upenn.edu/enabletech/) and also my other study project on mobile apps and social gaming (http://www.slideshare.net/Enderdoon/media-study-project-final-ydc2).
Yujin
http://www.linkedin.com/in/yujinchung
http://twitter.com/enderdoon
Can Traditional Active Management Be Saved?Clare Levy
Active managers need to start incorporating the lessons of behavioural science if they have a chance of reversing the flow of assets into passive investment vehicles. Eric Rovick highlights some of the areas of cognitive risk evident in active investment management and provides a managerial and operational framework for addressing them.
In the 13th hour, Congress avoided the “fiscal cliff” by passing the American Taxpayer Relief Act. This legislation preserved most of the George W. Bush-era tax cuts and carved out some new rules as well. This presentation will provide context around the passage of the American Taxpayer Relief Act and will summarize its provisions, with an emphasis on the impact of this major legislation to retirement plans. Additionally, remaining economic headwinds that prevail in the United States will be examined.
Retirement plan sponsors have a multitude of recordkeeping vendors from which to choose in assisting them with plan administration, compliance and participant education. Each potential vendor espouses a value proposition, which must be weighed in relationship to the plan’s needs, goals and objectives to determine if that particular vendor is a suitable fit.
While conducting a vendor search may seem burdensome, the benefits associated with the search make it more than worthwhile. By conducting a vendor search, plan sponsors can satisfy certain fiduciary responsibilities and optimize the plan’s benefit to its participants. Moreover, the perceived vendor search burden is significantly eased when a few simple best practices are followed.
In this presentation, we explore the benefits and best practices associated with conducting a vendor search. It concludes with three case studies that demonstrate the positive results and improvements that plan sponsors might expect from a well executed vendor search.
The legislative landscape in which retirement plans must operate is constantly evolving to meet the need for an appropriate level of industry regulation. Legislative and regulatory activity during 2013 to date has created numerous opportunities and challenges that retirement plan sponsors must address. In this program, Erik Daley, CFA, will provide an overview of this year's legislative and regulatory developments and focus on practical, consultative tips on how they might apply to your retirement plan.
Authors John Paglia and Robert Slee offer an alternative to using methodology designed for privately-trade companies as a means to valuate privately-traded companies. The article was originally published in the May/June 2011 issue of The Value Examiner. It is provided courtesy of The National Association of Certified Valuators and Analysts (http://www.nacva.com)
2017-01-25 A Framework for Strengthening Your Nonprofit’s Investment Reserve ...Raffa Learning Community
Nonprofit Executives and their Boards know they must periodically review reserve or investment policies. They don’t always know, however, what’s involved. Through his work on the Study on Nonprofit Investing (SONI), Dennis Gogarty of Raffa Wealth Management has developed an easy-to-follow investment policy framework which will assist nonprofits in developing or strengthening their organization’s policy and procedures.
Merlin released our latest white paper today entitled, Understanding Investor Due Diligence. This white paper reviews the entire investor due diligence process covering all the qualitative and quantitative aspects that are important to investors today. I hope you find this helpful and please let me know if you have any questions.
This white paper reviews the entire investor due diligence process covering all the qualitative and quantitative aspects that are important to investors today. It assists hedge fund manager’s clients to better prepare them for their capital raising mandates.
Entrepreneurs and investors must both understand the critical aspects of valuation for pre-revenue
and startup entrepreneurial ventures. By aligning expectations, such understanding fosters positive,
productive relationships between funders and founders. In addition, investors and entrepreneurs
benefit separately when they know the answers to essential questions. What are the most important
factors angel investors should consider in determining a company’s value? How can entrepreneurs
better present their companies to attract early-stage investors and build effective relationships?
“Investment Valuations of Seed- (Startup) and Early-Stage Ventures” by Luis Villalobos, founder of Tech
Coast Angels, defines perspectives from which investors and entrepreneurs view valuation and provides
insights that can reduce the natural contentiousness of negotiating valuation.
Founding vs Professional CEO Performance Analysis in SaaSYujin Chung
Research cited
For more info, check out my class blog (http://opim.wharton.upenn.edu/enabletech/) and also my other study project on mobile apps and social gaming (http://www.slideshare.net/Enderdoon/media-study-project-final-ydc2).
Yujin
http://www.linkedin.com/in/yujinchung
http://twitter.com/enderdoon
Can Traditional Active Management Be Saved?Clare Levy
Active managers need to start incorporating the lessons of behavioural science if they have a chance of reversing the flow of assets into passive investment vehicles. Eric Rovick highlights some of the areas of cognitive risk evident in active investment management and provides a managerial and operational framework for addressing them.
In the 13th hour, Congress avoided the “fiscal cliff” by passing the American Taxpayer Relief Act. This legislation preserved most of the George W. Bush-era tax cuts and carved out some new rules as well. This presentation will provide context around the passage of the American Taxpayer Relief Act and will summarize its provisions, with an emphasis on the impact of this major legislation to retirement plans. Additionally, remaining economic headwinds that prevail in the United States will be examined.
Retirement plan sponsors have a multitude of recordkeeping vendors from which to choose in assisting them with plan administration, compliance and participant education. Each potential vendor espouses a value proposition, which must be weighed in relationship to the plan’s needs, goals and objectives to determine if that particular vendor is a suitable fit.
While conducting a vendor search may seem burdensome, the benefits associated with the search make it more than worthwhile. By conducting a vendor search, plan sponsors can satisfy certain fiduciary responsibilities and optimize the plan’s benefit to its participants. Moreover, the perceived vendor search burden is significantly eased when a few simple best practices are followed.
In this presentation, we explore the benefits and best practices associated with conducting a vendor search. It concludes with three case studies that demonstrate the positive results and improvements that plan sponsors might expect from a well executed vendor search.
The legislative landscape in which retirement plans must operate is constantly evolving to meet the need for an appropriate level of industry regulation. Legislative and regulatory activity during 2013 to date has created numerous opportunities and challenges that retirement plan sponsors must address. In this program, Erik Daley, CFA, will provide an overview of this year's legislative and regulatory developments and focus on practical, consultative tips on how they might apply to your retirement plan.
Target date funds are quickly becoming the dominant investment option within many defined contribution retirement plans. Regulators have taken notice with the Department of Labor (DOL) contemplating new disclosure requirements for plans offering target date funds.
In order for a plan sponsor to meet their fiduciary obligations to prudently select and monitor their target date funds, a thorough analysis is necessary because of the underlying complexity of these products and their unique structure relative to the traditional "core" investment options that defined contribution sponsors are used to evaluating.
In this program, we present a framework for a sound fiduciary evaluation of a target date series.
The past 30 years has born witness to the collapse of the private pension system with for-profit employers, tax-exempt entities and now the governmental sponsors replacing defined benefit pension programs with defined contribution plans. This practice spawned a well-documented transfer of investment and funding risk from employer to employee. Now, most defined contribution plans render the employee the sole decision maker on the four factors that determine an employee's ability to retire successfully: contribution rate, investment strategy/return, time horizon, and spending needs in retirement.<br /><br /> In this presentation we will address what employers can do to help employees meet the demands of the new retirement plan era.
For nearly 40 years, ERISA has required retirement plan fiduciaries to ensure the reasonableness of service and investment fees paid by the plan. However, fee reasonableness has only recently grabbed headline attention due largely to the finalization of the 408(b)(2) regulations and the Missouri district court's decision in Tussey v. ABB, Inc. Despite the strength of its fee reasonableness standard, ERISA provides little practical guidance as to how and when plan fiduciaries should be making and documenting their fee reasonableness determinations. In this presentation, we provide a historical overview of the legislative, regulatory and judicial context surrounding this fundamental fiduciary duty; a look at recent Department of Labor regulatory examination activity centered on fee reasonableness; and a practical, step-by-step guide to meeting the fee reasonableness requirements.
Even with the most earnest intentions, mistakes inside of a retirement plan will most likely happen from time to time. Plan sponsors can take solace in knowing that there is a corrective solution for nearly every compliance problem. Knowing how to correct a plan error will help plan sponsors act swiftly so as not to ripen the problem should one occur. It can also help save the plan sponsor money. In this program, Multnomah Group will provide an overview of the correction programs available through both the Internal Revenue Service (for Internal Revenue Code issues) and the Department of Labor (for issues under the Employee Retirement Income Security Act).
Development of business strategies and business models for associationsajcortese
In order to fulfill their founding missions, several Associations observed a growing pressure on increasing their financial and business performance, with the objective of maximizing the generation of resources to be re-invested into relevant and valuable benefits, products and services for their stakeholders.
Associations, and their executives, are today called to a higher level of challenge in outlining effective strategies, drafting effective business plans and defining systems to monitor the efficiency of their organization.
Guidebook for Impact Investors: Impact MeasurementPurpose Capital
Purpose Capital recently published Guidebook for Impact Investors: Impact Measurement, a guidebook for impact investors to help them enhance their use of social metrics.
The guide provides investors with with:
- A basic overview of social metrics for impact investing
- An outline of the issues and challenges of social impact measurement
-A summary of existing social impact measurement tools and a description of how they are being used
-A set of diagnostic tools to help you think through key questions and issues related to measurement and to select appropriate social impact metrics based on selected goals
For more information, visit: http://www.purposecap.com/portfolio/guidebook-for-impact-investors-impact-measurement/
What's New with Corporate Retirement Plans? More Than You ThinkSkoda Minotti
This presentation discusses the rapidly changing (and litigious) landscape of corporate retirement plans and the best practices top companies are implementing to maintain a quality benefit offering, reduce risk exposures, and retain top talent.
Measuring the Blended Value of Corporate Social Responsibility and Social Ent...Karim Harji
Presentation to the Canadian Evaluation Society Annual Conference, Ottawa, June 2, 2009
Innovative evaluation methods and tools are emerging in the fields of corporate social responsibility (CSR) and social enterprise. The focus of these innovations is the measurement of the “blended value” (financial, social and environmental) that is created by CSR and social enterprise, which is of interest to social investors, “philanthrocapitalists” and governments.
This panel will summarize findings-in-process from ongoing applications in these spheres in Ontario, Ghana and other developing-world settings. There are advantages and challenges in applying “blended value” approaches that the presenters will examine. The panelists will also discuss the implications of these findings for the theory and practice of evaluation.
Eng - Company Profile TrustPartners Nov 2010TrustPartners
We support the innovative and successful Top Management during all its strategic and operational actions, to achieve sustainable economic and value growth; in particular we operate into 3 main areas:
- Business Planning & Strategy
- Performance Management
- Organization
We operate in Italy in the following industries:
- Gaming and Gambling
- Pharmaceutical and Life Cycle Management
- Tobacco
I have created this quick guide book on how to 'Develop an Impact Investment Strategy' for anybody who is trying to set up an Impact Investment Fund.
Please contact me on Linkedin for more information-
https://www.linkedin.com/in/ratan-rajpal
Similar to Improving Participant Outcomes Through Investment Menu Design (20)
Under ERISA Section 408(b)(2), retirement plan fees must be reasonable in light of the services being rendered. Retirement plan fees are also a hot target in the courts, most notably with last year's Tussey vs. ABB, Inc. decision. In this presentation, we discuss just what the reasonableness standard means for today's retirement plan sponsors, and an action plan for employers.
Retirement plan fiduciaries have a responsibility for the prudent selection and monitoring of plan investments. If your investment selection decisions are based solely on investment style, fees and historical returns, you may be missing the larger picture. In this presentation, we present a rigorous, multi-step process for selecting investment managers to serve your plan’s and participant’s needs. Using a use case scenario, we will demonstrate how to define the “Investment Universe”, the use and limitations of quantitative analysis, conducting proper qualitative due diligence, and the selection of a prudent investment for a participant-directed defined contribution retirement plan.
2. Scott Cameron, CFA
Scott is the Chief Investment Officer for the Multnomah Group and a Founding
Principal of the firm. In that role, Scott leads Multnomah Group’s Investment
Committee, is responsible for the development of the firm’s investment
research methodology, and conducts investment manager due diligence. Scott
also consults with plan sponsors on investment menu design, investment
manager selection, fiduciary governance, and vendor fees/services.
Scott is a member of the CFA Institute, the CFA Society of Portland, the
Investment Management Consultants Association, and the Portland Chapter of
the Western Pension Benefit Conference.
2 Improving Participant Outcomes Through Investment Menu Design
3. Agenda
• Evolution of Defined Contribution Plans
• Plan Sponsor Best Practices
• Target Maturity Investment Products
• Options for Low Risk Investors
3 Improving Participant Outcomes Through Investment Menu Design
4. DC Investment Lineups: Old Paradigm
• All participants are active investors
• More choices lead to better portfolios
• Fiduciary focus on 404(c) protection
• Focus on investment products/manager analysis High Risk
• Vendors compared on features
Specialty
Intl Equity Funds
(i.e.
U.S. REITs)
Equity
Core
Bond
Money Market /
Stable Value
Low Risk
4 Improving Participant Outcomes Through Investment Menu Design
5. Is the Old Paradigm Effective: the Evidence
Participant Type How
Participants
Self-Identify
Delegators 69%
Do-It-Yourselfers 30%
Self-Directed Sophisticates 1%
Source: J.P. Morgan Retirement Plan Services
5 Improving Participant Outcomes Through Investment Menu Design
6. Is the Old Paradigm Effective: the Evidence
Impact of Choice on P a r t i c ip a t i on Rates
Source: Iyengar, Sheena S.; Jiang, Wei; Huberman, Gur “How Much Choice is Too Much?: Contributions to 401(k) Retirement Plans”
6 Improving Participant Outcomes Through Investment Menu Design
7. Investors Fail to Track the Market
Annualized Returns for the 20 Years Ended 12/31/2010
10.00%
9.14%
9.00%
8.00%
6.89%
7.00%
6.00%
5.00%
3.83%
4.00%
3.00% 2.57%
2.00%
1.01%
1.00%
0.00%
Avg. Equity Investor S&P 500 Index Avg. Fixed Income Investor
Barclays Agg Bond Index Inflation
Source: Dalbar, Inc. 2011 Quantitative Analysis of Investor Behavior
7 Improving Participant Outcomes Through Investment Menu Design
8. DC Investment Lineups: New Paradigm
• Not all participants are the same
• Incorporate behavioral finance
knowledge into retirement
programs
• Fiduciary focus on participant
outcomes
Tier One
• Focus on menu construction
• Vendors compared on solutions
Tier Two
Tier Three
8 Improving Participant Outcomes Through Investment Menu Design
9. The Paradigm is Shifting
• Pension Protection Act of 2006
• Automatic enrollment
• Qualified Default Investment Alternatives (QDIA)
• J.P. Morgan – “Focus your AIM: Innovating the Defined Contribution Core
Menu to Help Increase the Odds of Participant Success”
• Manning & Napier – Two-Tier Menu Design
• Schwab Retirement Plan Services Inc. - Launches Schwab Index Advantage
• Vanguard – “Converging Trends Drive Sponsors to Change Plan Lineups”
9 Improving Participant Outcomes Through Investment Menu Design
10. Plan Sponsor Best Practices
Develop Fiduciary
Governance
Program
Communicate to Analyze Employee
Employees Demographics
Determine
Select Investment
Objectives for the
Managers/Products
Plan(s)
Select Asset Decide Investment
Classes Menu Structure
10 Improving Participant Outcomes Through Investment Menu Design
11. Analyze Employee Demographics
• Relevant Information • Methods
• Age • Anecdotal/Experience
• Income • Vendor Demographic Reports
• Tenure • Payroll Data
• Financial Literacy • Participant Surveys
• Participant Opinions • Focus Groups
11 Improving Participant Outcomes Through Investment Menu Design
12. Determine Plan Objectives
• Retirement Readiness
• Income Replacement is Best Measure
• General rule of thumb is 70%-80% of final year’s salary
• Can vary based on lifestyle, income, etc.
• Be Careful of Measurement Issues
• No one is “average”
• Shortfall risk is important
12 Improving Participant Outcomes Through Investment Menu Design
13. Decide Investment Menu Structure
• Tiered Methodologies are Preferable
• Simplifies Decision-Making
• Employee communication is clearer
• Decision-making is easier
• Offers Meaningful Choices to Participants
• Acknowledges participants are different
• No one-size-fits-all choice is available
• Participants want different options
13 Improving Participant Outcomes Through Investment Menu Design
14. Index Tier Option
• Ability to Build Globally Diversified
Index Portfolio
• Low Cost
• Broad Diversification Asset Allocation Funds (i.e. Target
Maturity, Target Risk, etc.)
• Style Specific Actively Managed
Funds for Active Participants
• Optional Self-Directed Brokerage
Core Index Funds
Account for Most Active
Participants
Active Style Funds
(Optional) Self-Directed Brokerage
Account / Mutual Fund Window
14 Improving Participant Outcomes Through Investment Menu Design
15. Sample Index Tier
Tier 1: QDIA
Tier 2: Core Index Array
Stable Principal Fixed Income U.S. Equity International Equity
Intermediate
Money Market U.S. Stock International Stock
Bond
Tier 3: Core Active Array
Stable Principal Fixed Income U.S. Equity International Equity Specialty Funds
Active
Intermediate
Bond
Large Cap Value Large Cap Growth Large Cap Value Large Cap Growth
Fixed Annuity Inflation REIT
Protected
Bond
Global Bond Small Cap Value Small Cap Growth International Small Cap
Tier 4: Self-Directed Brokerage Account
15 Improving Participant Outcomes Through Investment Menu Design
16. Multi-Manager Core Tier Option
• Core Array Consisting of Multi-
Manager Portfolios
• Money Market/Stable Value
• Equity
Asset Allocation Funds (i.e. Target
• Fixed Income Maturity, Target Risk, etc.)
• (Optional) Other Categories
• Core Strategies Incorporate
Multiple Sub-Asset Classes
• Small Cap
Core Multi-Manager Strategies
• REITs
• Emerging Markets
• High Yield
• Global Bond
• Core Strategies Incorporate Open (Optional) Self-Directed Brokerage
Account / Mutual Fund Window
Architecture Managers
16 Improving Participant Outcomes Through Investment Menu Design
17. Tier 1 – Asset Allocation Strategies
• Tier 1 is Typically the QDIA or
QDIA-Type Option
• Target maturity or target risk Growth of Target Maturity Products
$400,000,000,000
• Fund or model portfolio
• Target Maturity Funds are Most $350,000,000,000
Common $300,000,000,000
• Simplicity in design
$250,000,000,000
5 Year Annualized Returns (Period Ending 12/31/2010) $200,000,000,000
Percentile Single Target- Managed All Other
Date Fund Account Participants
$150,000,000,000
Mean 3.93% 3.65% 3.76%
5th 3.62% 2.20% -0.02% $100,000,000,000
25th 3.62% 3.08% 2.66%
50th 3.90% 3.66% 3.80% $50,000,000,000
75th 3.90% 4.22% 4.64%
$0
95th 4.65% 5.06% 8.09%
Source: Vanguard 2011 “Participants During the Financial Crisis: Total Returns 2005-
2010”
Source: Morningstar Direct
17 Improving Participant Outcomes Through Investment Menu Design
18. Target Maturity Selection Criteria
Investment Management Firm
Capabilities
Equity Glide Path
Costs
Asset Class
Selection
Portfolio
Management
18 Improving Participant Outcomes Through Investment Menu Design
19. Select Core Asset Classes
• Objectives
• Provide participants with the ability
to create a diversified portfolio
tailored to their specific risk
tolerance and time horizon
•
16
Allow participants to diversify their
holdings among a number of 14
different asset classes with 12
different risk and return profiles
• Utilize low correlated asset classes 10
to minimize the amount of risk at
Return, %
8
any given return profile
• Constraints
6
•
4
Minimize opportunity for
participants to select undiversified 2
portfolios with unrealistic return
0
and risk expectations 0 2 4 6 8 10 12
Ris k (StDev Rtn), %
14 16 18 20 22
• Avoid narrowly defined “asset Frontier Cas h S&P 500 Index Small Cap Stoc ks Mid Cap Stoc ks REITs Intl Stoc ks Corporate Bonds
classes” with risks that are difficult
to identify
19 Improving Participant Outcomes Through Investment Menu Design
20. Global Market Capitalization
$31.7 Trillion as of December 31, 2011
Source: Dimensional Fund Advisors; In US dollars. Market cap data is free-float adjusted from Bloomberg securities data. Many small nations not displayed. Totals may not equal
100% due to rounding. For educational purposes; should not be used as investment advice. 1. An example large cap stock provided for comparison.
20 Improving Participant Outcomes Through Investment Menu Design
21. Style Boxes ≠ Asset Classes
Calendar Year Returns (2008)
Large
0.00%
-5.00%
-10.00%
-15.00%
-20.00%
-25.00%
Mid
-30.00%
-35.00%
-40.00%
-45.00%
-50.00%
Small
Large Value Large Blend
Large Growth Mid Cap Value
Mid Cap Blend Mid Cap Growth
Small Value Small Blend
Value Blend Growth
Small Growth
21 Improving Participant Outcomes Through Investment Menu Design
22. Diversification is Tricky
Correlation to the S&P 500 Index (Rolling 60 Month)
1.0
Correlation
0.0
-1.0
Dec -82 Dec -85 Dec -87 Dec -89 Dec -91 Dec -93 Dec -95 Dec -97 Dec -99 Dec -01 Dec -03 Dec -05 Dec -07 Dec -09 Mar-12
Small Cap Stoc ks Mid Cap Stoc ks REITs Intl Stoc ks Corporate Bonds
Small Cap Stocks = Russell 2000 Index; Mid Cap Stocks = Russell MidCap Index; REITs = Dow Jones US Select REIT Index; Intl Stocks = MSCI EAFE; Corporate Bonds = BC Corporate Idx
22 Improving Participant Outcomes Through Investment Menu Design
23. Select Investment Managers/Products
• Pre-Determine Investment Manager’s Role in the Menu
• Understand the Investment Manager’s Investment Philosophy
• Source of Value-Added
• Types of Market Environments That Create Headwinds/Tailwinds
• Evaluate Historical Performance in the Context of Investment Philosophy
23 Improving Participant Outcomes Through Investment Menu Design
24. Manager Performance Does Not Repeat
100%
90%
25% 25%
80%
35%
70%
25% 23%
60%
23%
50%
40% 23%
25% 13%
30%
20%
25% 29% 29%
10%
0%
1996-2000 2001-2005 2006-2010
Source: Morningstar; 190 funds with 15 year track records
24 Improving Participant Outcomes Through Investment Menu Design
25. Communicate to Employees
• Benefits • Challenges
• Demonstrates meaningful choices • Standard vendor communications
to participants don’t always support tiered
• Minimizes “choice overload” investment menus
• Simplifies participant decision- • Vendor websites are not structured
making to support tiered investment menus
• Tiered menu communications are
usually tailored for proprietary
investment products
25 Improving Participant Outcomes Through Investment Menu Design
26. Low Risk Investment Options
Option 1 Option 2 Option 3 Option 4
Money Money Money
Stable Value Market Market Market
Fund
Short Term
Ultra Short Short Term
Government
Term Bond Bond
Bond
Intermediate
Bond Intermediate Intermediate Intermediate
Bond Bond Bond
26 Improving Participant Outcomes Through Investment Menu Design
27. Stable Value Funds Face Market Pressure
• Consolidation of stable value • Back to the future
providers
• Use of more traditional
• Higher costs/lower capacity will GICs/separate account GICs with
continue to squeeze providers
synthetic GICs portfolios
• More expensive wrap insurance will
bring new entrants into the market • Bundling of wrap insurance with
investment management
• Low interest rate environment
• Increased usage of traditional GICs
• Improved MV/BV ratios
and separate account GICs by plan
• Stable value funds have only existed sponsors
during a period of steady, declining
interest rates
• Increasing rate environment will put
pressure on MV/BV ratios
• May also cause higher levels of
participant transactions as
participants try to arbitrage return
differentials
• Money market funds react more
quickly to yield changes (may
outperform stable value for a period of
time)
27 Improving Participant Outcomes Through Investment Menu Design
29. Disclosures
Multnomah Group, Inc. is an Oregon corporation and SEC registered investment
adviser.
Investment performance and returns are based on historical information and are not
a guarantee of future performance. Investing contains risk. Some asset classes
involve significantly higher risk because of the nature of the investments and the
low liquidity/high volatility of the securities.
Any information and materials contained herein or on our website are provided for
general informational purposes only and are not intended to be comprehensive for
any particular subject. Multnomah Group utilizes information from third party
sources believed to be reliable but not guaranteed, and as a result, information is
provided to you "as is." We do not represent, guarantee, or provide any warranties
(either express or implied) regarding the completeness, accuracy, or currency of
information or its suitability for any particular purpose. Multnomah Group shall not
be liable to you or any third party resulting from any use or misuse of information
provided.
Receipt of information or materials provided herein or on our website does not
create an adviser-client relationship between Multnomah Group and you.
Multnomah Group does not provide tax or legal advice or opinions. You should
consult with your own tax or legal adviser for advice about your specific situation.
29 Improving Participant Outcomes Through Investment Menu Design