MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication
an InvestmentWires' Publication
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MutualFundWire.com
The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication |
|
Monday, July 20, 2009 Demand for Passive 401ks Grows ... Albeit from a Small Base Defined contribution plan sponsors are becoming more likely to consider lower-cost index funds for their plans. Or so contends an article by Eleanor Laise in an article in the Wall Street Journal. Still, barriers to passive funds such as the lack of revenue created by the investments to cover plan administration and recordkeeping costs remain barriers to more plan sponsors shifting assets to passive strategies. Laise points to a survey from Hewitt Associates and anecdotal data from three vendors to support the article's contention. Hewitt Associates, a Lincolnshire, Illinois-based recordkeeper in the mega-plan market, surveyed plan sponsors and found that 17 percent said that they are more likely to shift some or all of the actively managed options in their defined contribution plans to passive strategies. That is double the 8 percent that provided a similar response last year. Hewitt does not manage money on either an active or passive basis for plan sponsors. Laise also points to BlackRock's management team stressing the importance of 401(k) plans to its plans for its new acquired Barclays Global Investors unit. BGI is one of the leaders in offering passive products both through separate accounts and its iShares unit. Two of BGI's distribution partners -- Ascensus and Invest n Retire LLC -- are also featured in the article. Darwin Abrahmson, founder of Invest n Retire, tells Laise that assets in his firm's client base are "on pace to rise at least tenfold." So far the firm has gathered just $50 million in ETF-based DC plans. Laise also talked to plan sponsors making the move to offering passive investments, including Rotary International which sponsors a $15 million plan and Accept Software Corp. which sponsors a $1.5 million plan. A third plan sponsor, The Hawaii Prosperity Plan, is cited as an example of a multi-employer plan making the shift to passive investments. It was startd by a "reformed" money manager Cris Borden. Health care accounting firm Abrix Group LP is a fourth plan sponsor mentioned in the article. It is reportedly considering switching its plan to a entirely index-fund-and-ETF lineup, according to the article. Printed from: MFWire.com/story.asp?s=22097 Copyright 2009, InvestmentWires, Inc. All Rights Reserved |