PLANADVISER - May/June 2021 - 24

investments | cover story
White-Label Funds of Funds
One approach to streamlining a core
menu is to roll up several managers'
offerings
into a single, white-label
fund within an asset class.
" So if a fund has five large-cap
growth funds and three large-cap value
funds, it might package them together
and offer it as one U.S. equity option, "
says James Martielli, CFA, CAIA, head
of investment solutions in the institutional
investor group at The Vanguard
Group Inc. in Malvern, Pennsylvania. " It
creates something that's a little easier
to understand. "
Using a bundled, white-label fund
increases
diversification
without
the participant getting paralyzed by
choice, Martielli adds. It also eliminates
the fund brand names, which
could confuse some participants.
There are benefits to plan fiduciaries
as well, including the ability to switch
out more fund managers on the back
end, as necessary, without having
to give notice and communicate the
change to participants.
Building these funds in a way that
improves participant portfolios takes a
lot of work by plan sponsors and their
adviser. Rather than simply looking at
the brand name of a fund or the offerings
from their recordkeeper, plan
sponsors have to examine factors such
as long-term tracking error, downside
capture, excess returns and consistency
of returns, Verdeyen says.
While fees still matter in this analysis,
plan sponsors are more focused on
building a fund composed of multiple
managers, which will offer a less volatile
experience for participants.
" You can make the experience more
measured and consistent for participants
by combining all of the styles
underneath the fund, " Verdeyen says.
" That's the way plan sponsors have
thought about still keeping as much or
more diversification in the lineup, with
fewer seats around the table in terms
of the number of funds. "
CITs Come Downstream
Replacing mutual funds with collective
investment trusts (CITs) is a trend
that, advisers say, has existed for years
at large plan sponsors, but has started
24 | planadviser.com May-June 2021
Framing the
investment
menu
" Do it for me "
" Do it with me "
" Do it myself "
Investing retirement
savings in a
" portfolio "
Positioning
risk
A range of portfolios
that are " growthfocused
to stabilityfocused "
Financial
experts
Your
retirement
investments are
" managed " by
" financial experts or
professionals. "
Offering of
investments,
income
options, tools
and resources
at retirement
Using my
retirement
plan savings
to create/
receive ...
" Retirement
planning program "
" Retirement-ready
program "
" Tier 1, Tier 2, Tier 3 "
Investing retirement
savings in a " fund "
or " strategy "
A range of portfolios
that are " high-risk to
low-risk "
Your retirement
investments
are " constructed "
by " institutional
managers. "
" Retirement tier "
Use the Right Words
Investment jargon can be confusing and stymies
decisionmaking. Does the plan's language resonate with
participants, or have they stopped listening? To help increase
participant engagement and understanding, use personal,
positive and plausible words in plain English.
4
Words to Use
8
Words to Lose
" Income "
" Paychecks "
" Checks "
" Retirement income "
" Income for life "
Source: Invesco, " Watch Your Language "
" Secured income "
" Protected income "
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PLANADVISER - May/June 2021

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