Administration June 20, 2016

Public Pensions Making Slow Progress

State and local government employers are paying a larger share of required contributions, an analysis finds.
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The funded status of public pensions has increased from 73% in 2014 to 74% in 2015, according to a new issue brief from the Center for State and Local Government Excellence, “The Funding of State and Local Pensions: 2015-2020.”

The analysis by Alicia H. Munnell and Jean-Pierre Aubry finds one reason for the improvement is that plan sponsors paid a greater share of their actuarially determined employer contribution (ADEC), even though that contribution has increased as a percentage of payroll. Employers paid 91% of their required contribution in 2015 compared with 86% in 2014.

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The growth in the rate of pension liabilities remains low, reflecting benefit cutbacks that have been made in recent years. The issue brief authors project that plans will be 78% funded by 2020 if their portfolio achieves its assumed rate of return. If returns are lower, funding will drift lower.

While most pension plans are making slow, steady progress, and 38% are more than 80% funded, 20% of the plans are less than 60% funded, the report notes.

The analysis is based on the 160 largest state and local pension plans in publicplansdata.org. The full Issue Brief can be downloaded from here.
Products June 20, 2016

Fidelity Introduces New Institutional Premium Shares

Alongside the introduction of three new funds, Fidelity has unveiled an “institutional premium” share class.    

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Fidelity Investments announced a series of enhancements to its line-up of index mutual funds, including the launch of three new equity funds, replacing the Spartan brand name, and expanding the availability of institutional share classes.

With the expansion, the firm now offers 19 equity, fixed-income and hybrid index mutual funds, 13 Fidelity Freedom Index Funds, and 12 passive ETFs.

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Colby Penzone, senior vice president for Fidelity’s Investment Product Group, says the enhancements build on Fidelity’s ongoing commitment to “provide access to a wide-array of high-quality, low-cost index funds, as well as managed solutions.”

The three new funds are the Fidelity Large Cap Growth Index Fund, the Fidelity Large Cap Value Index Fund, and the Fidelity Total International Index Fund. Each new fund is offered with multiple share classes “at very competitive prices.” These include both institutional ($5 million minimum investment, generally) and “institutional premium” ($100 million and up) share classes.  

“Each fund will attempt to replicate the performance of its respective index, before expenses, by normally investing at least 80% of its assets in securities included in the index,” the firm explains.

Additional details include the following:

  • Fidelity Large Cap Growth Index Fund seeks to provide investment results that correspond to the total return of stocks of large capitalization U.S. companies. The fund will normally invest at least 80% of its assets in securities included in the Russell 1000 Growth Index.
  • Fidelity Large Cap Value Index Fund seeks to provide investment results that correspond to the total return of stocks of large capitalization U.S. companies. The fund will normally invest at least 80% of its assets in securities included in the Russell 1000 Value Index.
  • Fidelity Total International Index Fund seeks to provide investment results that correspond to the total return of foreign developed and emerging stock markets. The fund will normally invest at least 80% of its assets in securities included in the MSCI ACWI (All Country World Index) ex USA Investable Market Index (IMI) and in depository receipts representing securities included in the index.

Additionally, Fidelity has replaced the “Spartan” brand within its line-up of index mutual funds with the Fidelity name. For example, the Spartan 500 Index Fund is now named the Fidelity 500 Index Fund. “This move creates consistency in branding across Fidelity’s diverse product line,” according to the firm. “As part of this effort, Fidelity has also renamed two of its four underlying index fund share classes. The Fidelity Advantage Class has been renamed ‘Premium Class’ and the Fidelity Advantage Institutional Class has been renamed ‘Institutional Premium Class.’”

Finally, Fidelity also expanded the availability of its index mutual fund line-up. Effective immediately, the company’s Institutional share classes (Institutional and Institutional Premium) are available to investors on and off the Fidelity platform, both retail and intermediary, provided they meet eligibility requirements.

For more information about, visit www.fidelity.com. 

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