Products July 29, 2014

American Century Debuts Three Income Funds

July 29, 2014 (PLANSPONSOR.com) – American Century Emerging Markets Debt, American Century Strategic Income and American Century Short Duration Strategic Income were rolled out by American Century Investments.
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Emerging Markets Debt is a total return fund that incorporates emerging markets debt with a global currency overlay. The team can invest at least 80% of the portfolio in fixed income and floating rate securities that are economically tied to emerging markets.

Strategic Income is an income fund that institutes tactical sector management. The investment team uses an income-focused investment process that offers clients broad securities. The fund has a 50% maximum single sector, and the duration will be within two years of the fund’s benchmark.

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Short Duration Strategic Income is an income fund that uses a similar approach by initiating an income-focused investment process capable of providing clients with broad exposure. The fund has a 50% maximum single sector exposure limit, though the shorter duration may help mitigate interest rate risk. The duration for this fund will be within two years of the fund’s benchmark, and abides by the Barclays U.S. Government/Credit 1 – 3 Year Index.

All three funds are available in various share classes, including investor, institutional, A, C, R and R6. As a result, they are available to defined benefit (DB) plan investors as well as defined contribution (DC) plans.

Benefits July 29, 2014

GAO Questions Advantages of Managed Accounts

July 29, 2014 (PLANSPONSOR.com) – A lack of information and consistent standards makes it difficult for 401(k) plan sponsors to gauge whether managed account services truly benefit participants over the long term, says a new report.
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In the report, “401(k) Plans: Improvements Can Be Made to Better Protect Participants in Managed Accounts,” the U.S. Government Accountability Office (GAO) says because little is known about whether managed accounts are advantageous for 401(k) plan participants, and whether plan sponsors understand their own role and potential risks, it was asked to review and answer these questions.

The GAO examined how the relevant service providers structure managed accounts, the advantages and disadvantages of these accounts for participants, and the challenges plan sponsors face in selecting and overseeing such providers.

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After reviewing eight managed account providers in 2013, who represented about 95% of the industry involved in defined contribution plans, the GAO found that these providers varied in how they structured managed accounts, including the services they offered and their reported fiduciary roles. The GAO found the issues with fiduciary roles could potentially provide less liability protection for plan sponsors for the consequences of the provider’s choices.

The report also notes that while participants in managed accounts received improved diversification and savings rates, this was offset by fees for such accounts varying widely over the long term and thus lowering accounts balances. The GAO also found participants generally do not receive performance and benchmarking information for their managed accounts.

Similarly, the GAO says plan sponsors are challenged by insufficient guidance and inconsistent performance information when selecting and overseeing managed account providers. Without better guidance, it notes, plan sponsors may be unable to select a provider that offers an effective service for a reasonable fee.

The report recommends that the Department of Labor (DOL) consider provider fiduciary roles, require disclosure of performance and benchmarking information to plan sponsors and participants, and provide guidance to help sponsors better select and oversee managed account providers. The DOL agreed with these recommendations and says it will consider changes to regulations and guidance to address any issues.

Highlights of the report can be found here. The full report can be found here.

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