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Friday, February 04, 2005

Who Wants to Manage Social Security Money?

News summary by MFWire's editors

The Wall Street Journal's Tom Lauricella predicts that Barclays Global, State Street Global Advisors and Vanguard would be on the short list as managers for Social Security money, if reform is actually had.

Granted, all three are well-known indexers, (Barclays already manages four of the five funds offered by the Thrift Savings Plan), but there's a small problem with the list -- someone on there doesn't belong. While BGI and SSgA are both indexers and entrenched in the institutional world, Vanguard is dominant in the retail channel. And in that channel, Jack Brennan & Co. have been consistently moving away from smaller account balances. For both of those reasons, Vanguard is an unlikely candidate. (Incidentally, Deutsche Bank is also a large institutional indexer, but for obvious reasons a problematic choice).

The more important race has to do with who will determine allocations of Social Security money. For that, the government will likely enlist the help of an investment consultant, much like it does with the Thrift Savings Plan. The government would likely draw from the ranks of the Mercer Investment Consultings (who won the TSP's lifecycle funds contract in November) and Watson Wyatts of the world. Now that's a race to watch. 

Edited by: Theresa Sim

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