Products August 13, 2024

Oaktree Dropped From Vanguard Emerging Markets Fund

Vanguard has reallocated Oaktree’s advisement to two other current fund advisers.

Reported by

The Vanguard Group on Monday announced its decision to drop Oaktree Fund Advisors LLC as one of the investment advisers for a $785 million emerging markets stock fund.

Oaktree will be removed from the Emerging Markets Select Stock Fund, designed to provide a “low-cost way to gain equity exposure to emerging markets.” Oaktree’s allocations will be split among two investment advisers: Baillie Gifford Overseas and Pzena Investment Management, according to the announcement.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

“Vanguard’s manager research team conducts ongoing reviews of current and prospective investment advisors, looking beyond short-term performance to focus on the drivers of long-term success for investors,” the announcement stated. “As part of this review process, Vanguard determined that changes to the advisory structure would best serve current and future shareholders of the fund.”

After the move, the adviser target allocations for the fund will be: Baillie Gifford 37.5%, Pzena 37.5% and Wellington Management Co. LLP 25%. Oaktree will not be an investment adviser on any Vanguard funds, according to a spokesperson.

In addition, the expense ratio of the fund will decrease to 0.79% from 0.80%, while the objectives of the fund will remain the same.

Since inception in 2011, the fund has outperformed Vanguard’s benchmark for it—the FTSE Emerging Index—with a return of 2.88%, compared with the benchmark’s 2.74%, according to the company’s tracking. But so far in 2024, the fund had underperformed the benchmark with a return of 6.00%, compared with the benchmark’s 8.98%.

Vanguard is known for relatively lower-cost, passive investment strategies and holds the No. 2 spot in the 2023 PLANADVISER DCIO Survey in terms of assets managed. Among firms that participated in the survey, BlackRock led the list of asset managers in DC plans at $1.164 trillion, followed by Vanguard at $1.161 trillion and State Street Global Advisors at $579 billion.

Oaktree Fund Advisors had $9.5 billion in assets under management as of its March 2024 ADV Form filing. Its parent company, Oaktree Capital Management, has $193 billion in AUM, according to its website.

Ask the Experts August 13, 2024

How Does SECURE 2.0’s Mid-Year Termination of SIMPLE IRAs Work?

Experts from Groom Law Group and CAPTRUST answer questions concerning retirement plan administration and regulations.

Reported by

Q: The SECURE 2.0 Act of 2022 now allows a mid-year termination of a SIMPLE IRA and replacement with a safe harbor 401(k) plan. I understand the 25% early distribution tax will not apply to distributions from a terminated SIMPLE IRA within the first two years of participation if the distributed assets are rolled into a new 401(k) or 403(b) plan, and the rollover contributions are then subject to the distributable events permitted in the 401(k) or 403(b) plan. Do these distribution rules apply to all IRA rollovers from the SIMPLE IRA or only for participants that had not yet met the two-year participation requirement?

Kimberly Boberg, Kelly Geloneck, Emily Gerard and David Levine, with Groom Law Group, and Michael A. Webb, senior financial adviser at CAPTRUST, answer:

Get more!  Sign up for PLANSPONSOR newsletters.

A: Great question! You are correct that Section 332 of SECURE 2.0 waives the limitation on rollovers from a SIMPLE IRA within two years of initial participation by providing an exception to the 25% additional tax if an employer “terminates the qualified salary reduction arrangement of a SIMPLE IRA plan and establishes a 401(k) plan or 403(b) plan.” Such rolled over amounts are then subject to the distributable events set out in section 401(k)(2)(B) or 403(b)(11), as applicable, for participants within that initial two-year period. However, as this provision is merely an exception to the tax for new participants, the general distribution rules for rollover contributions likely continue to apply to rollovers by participants who are outside that two-year participation window. See IRS Notice 2024-2(G-4).

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

Do YOU have a question for the Experts? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issgovernance.com with Subject: Ask the Experts, and the Experts will do their best to answer your question in a future column.

«