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Rating:How Do Funds Win Spots on 401k Platforms? Not Rated 4.0 Email Routing List Email & Route  Print Print
Friday, January 14, 2005

How Do Funds Win Spots on 401k Platforms?

Reported by Theresa Sim

For many people mutual funds and 401(k) plans have become synonomous terms, yet only a relative handful of the more than 600 fund advisors have distribution to retirement plan sponsors. Some shops may boast of a Morningstar top-ranked fund, but that is not enough to win a spot on a nationally distributed bundled 401(k) platform.

Executives at Thornburg Investment Management and Neuberger Berman, two fund firms who recently recently won spaces on American United Life's platform, report that 401(k) providers are seeking more than just top performance from their alliance partners. Indeed, they say the quest to land a slot on the better platforms is a quest to differentiate your funds and to promote that elusive "value add."

Providers are looking for a "more holistic approach, not just selling a product," says Rocco DeiBruno, director of Thornburg's retirement group.

In DeiBruno's mind, that means that providers are looking for education and training, not just a commodity. "We have really found that a lot of the providers are looking for partners who can work with them…in the area of ERISA fiduciary responsibilities," says DeiBruno. "The market's really changing…plan sponsors are much more sophisticated [and] want to and need to know more about their responsibilities," he adds.

As such, the firm offers seminars about fiduciary responsibility. Thornburg also holds joint trainings with advisors and sponsors and is constantly developing education material, remarks DeiBruno.

Peter Sundman, president of Neuberger Berman, comments that the old 80/20 rule generally applies to platform relationships, as well. "80 percent of our assets are coming from 20 percent of the platforms," he clarifies. Managers, therefore, generally focus their efforts on the 20 percent.

They seem to be doing something right. Both Thornburg and Neuberger were just added to American United Life's retirement platform. Thornburg has distribution through 60 platforms, and was recently added to Fidelity's advisor platform. Neuberger is distributed 114 platforms, says Sundman.

DeiBruno says that Thornburg approached AUL after some advisors that use AUL's platform suggested the idea. "We're excited about the AUL program…they have a very good presence in the small market," says DeiBruno.

What do managers want from the relationship? Thornburg looks for providers "who clearly have a presence and market share in each of those markets" and run open architecture platforms, says DeiBruno. While those are the ideal circumstances, DeiBruno also says that the firm "would love to be represented on every platform." 

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