Callan Releases Study of Investment Manager-Sponsored 401(k) Plans

CEO and Chief Research Officer Greg
Allen authors an analysis of the retirement plans investment
managers offer their own employees

SAN FRANCISCO–(BUSINESS WIRE)–Callan,
a leading institutional investment consulting firm, announced today the
release of The
Cobbler’s Shoes: How Asset Managers Run Their Own 401(k) Plans.
The white paper explores what the investment management industry, the
stewards tasked with managing the investments of 401(k) plans for
others, do for their own employee base.

Co-authored by Mr. Allen and Matt
Loster, a vice president in Callan’s Measurement Development Group,
the paper analyzes U.S. Department of Labor data of 157 asset management
firms and compares that dataset to a broader population of 55,000 plans.
The analysis examined a number of key metrics of savings behavior at the
plan level and then delved into the design of the investment lineups.

“We were curious about the investment management industry for a variety
of reasons,” said Mr. Allen. “Their employees are investment
professionals and presumably more engaged (and potentially vocal) about
the design of their plans. They are also faced with the interesting
question of employing products managed by their competitors, or in some
cases, employing their own products. Ultimately, we were interested to
see how these factors affected plan design and whether it resulted in
meaningful differences from the broader population.”

Highlights from the study examining asset manager-sponsored 401(k) plans
include:

• Employee Ownership: There is an unexpectedly high correlation
  between high balances, high contribution rates, and employee
  ownership—8 of the top 10 firms in terms of average balances were
  privately held.
• Belief in Active Management: Plans (and their participants)
  allocated a higher proportion of assets to active management
  strategies, likely reflecting the firms’ business models, as many of
  these firms oversee actively managed strategies.
• Expense Management: Manager-sponsored plans generally have done
  a good job managing expenses (including fees), particularly given the
  allocation to active strategies relative to the broader population.
• More Complexity: Plans generally embraced complexity over
  simplicity in their investment design, such as the breadth of options
  in their investment lineups and greater use of brokerage windows.
• Participant Selection Differences: Asset allocation decisions
  of participants in manager-sponsored plans largely resembled the
  broader industry but with a few key differences:
  • Allocations to the “other” category and a lower adoption rate of
    target date funds relative to the broad industry (70% for the
    sample versus 91% for the broader industry)
  • Lower allocations to capital preservation funds (i.e., money
    market and stable value options), which could be suggestive of a
    longer-term investment perspective and appreciation for
    diversification

• Employer Contributions a Priority: Investment managers have
  made employer contributions an important component of their benefits
  package—with all plans making some form of employer contribution to
  their plans in 2016 at a rate almost five times that of the broader
  population. This, along with other factors, has contributed to
  relatively higher average balances.

Mr. Allen, Mr. Loster, and others from Callan will be hosting a
webinar discussing more results of this study on June 18. To learn more
and register, click here.

About Callan

Callan was founded as an employee-owned investment consulting firm in
1973. Ever since, we have empowered institutional clients with creative,
customized investment solutions backed by proprietary research,
exclusive data, and ongoing education. Today, Callan advises on more
than $2 trillion in total fund sponsor assets, which makes it among the
largest independently owned investment consulting firms in the U.S.
Callan uses a client-focused consulting model to serve pension and
defined contribution plan sponsors, endowments, foundations, independent
investment advisers, investment managers, and other asset owners. Callan
has six offices throughout the U.S. Learn more at callan.com.

About Callan Institute

The Callan Institute aims to improve the best practices of the
institutional investment community through research, education, and
dialogue. To support this mission, the Callan Institute publishes
practical research, hosts industry events, and sponsors a robust
educational curriculum. Learn more at callan.com/callan-institute.

Contacts

Elizabeth Anathan
[email protected]
415-274-3020