Recently, the DOL released its second attempt at redefining ERISA’s definition of “fiduciary” for the era of participant-directed retirement savings. The new, proposed regulation is significantly different than ERISA’s existing definition, broadening both the group of individuals and firms considered fiduciaries, as well as expanding the retirement savings vehicles covered by the new fiduciary standards to include IRAs. Advisers, consultants and brokers are most significantly impacted by the proposed regulation as drafted, but plan sponsors can also expect changes: advisers and consultants previously not considered fiduciaries to date may now become fiduciaries, and employee investment education programs may need to be revised. The regulation is in proposed form right now and may change before the time it becomes final. This article introduces a few of the changes most applicable to plan sponsors.  August 2015

In May, the Supreme Court of the United States (the “Supreme Court”) published its long-awaited opinion in Tibble v. Edison International. The Supreme Court held that an ERISA fiduciary has a duty to continuously monitor the prudence of investment options offered under a qualified retirement plan, separate and distinct from their duty to prudently initially select investment options. While the Supreme Court’s brief opinion clearly dictates a fiduciary’s responsibility under ERISA to review investment options on a continuing basis, it did not express an opinion on the scope of such a review.  July 2015

Ball of Confusion (That’s What the World is Today)

The Temptations had a hit single by this title in 1970. Forty five years ago they were commenting on the state of the world at the time. It appears their observations are still relevant today. Hot wars and Cold wars, nuclear proliferation, social unrest, political corruption and economic disruption were daily headline themes confronting and confounding investors. The more things change the more they stay the same.  Newsletter 6-30-2015

There has been much publicity about active managers’ inability to beat their benchmarks over the years. However, upon closer inspection, funds that have remained truly active have shown ability to add value above their benchmarks. A study conducted by Yale professors Martijn Cremers and Antti Petajisto set out to find variables that could help predict fund performance. One variable was active share, which measures a fund’s percentage of holdings that differs from the benchmark index. For example, an index fund has an active share of zero percent and an active fund with no benchmark overlap has an active share of 100 percent. They found that active share is predictive of excess returns. Their study showed that funds with the highest active share and moderate tracking error outperformed by about 1.5 percent per year on average while funds with the lowest active share underperformed by a similar amount.¹  May 2015