Bloomberg Sued Over 401(k) Funds That Allegedly Lagged Market

A former Bloomberg employee filed a complaint accusing Bloomberg L.P. and its retirement plan fiduciaries of violating federal benefits law by retaining poorly performing investment funds in the Bloomberg L.P. 401(k) Plan for more than a decade, allegedly eroding workers’ retirement savings.

Rajappan Rajkumar v. Bloomberg L.P., filed Thursday in U.S. District Court for the Southern District of New York, accuses Bloomberg of violating its fiduciary duties under the Employee Retirement Income Security Act. The complaint alleges that Bloomberg and its plan committees failed to remove two actively managed stock funds—the Harbor Capital Appreciation Fund and the Parnassus Core Equity Fund—despite long-term underperformance compared with their benchmarks and the availability of lower-cost alternatives, leaving roughly 20,000 current and former employees exposed to inferior returns.

The complaint alleges that Bloomberg selected the Harbor Capital fund in about 2010 and the Parnassus fund in 2015 and continued to offer both, even as their results lagged major market indexes such as the Russell 1000 Growth Index and the S&P 500 over one-, three-, five- and 10-year periods. As of the end of 2024, employees had invested more than $497 million in the two funds combined, according to the complaint.

According to the filing, the Harbor Capital fund underperformed its benchmark by more than 23 percentage points over a 10-year period ending in 2019 and continued to trail comparable funds and index products in subsequent years. The Parnassus fund is alleged to have followed a similar pattern, falling behind the S&P 500 and competing funds for extended periods despite charging higher fees for active management.

The complaint claims Bloomberg’s fiduciaries ignored “clear warning signals” that the funds were no longer prudent options and failed to replace them with readily available alternatives from firms such as Vanguard, Fidelity or BlackRock that offered similar market exposure at lower cost. As a result, the participants allegedly suffered millions of dollars in lost investment gains, according to the complaint.

The complaint asks the court to order Bloomberg to restore losses to the plan, impose other equitable relief and potentially remove the fiduciaries responsible for the alleged breaches. 

Bloomberg did not immediately respond to a request for comment.

Sanford Heisler Sharp McKnight filed the complaint on behalf of the plaintiffs.

The Bloomberg L.P. 401(k) Plan had more than $5.7 billion in assets with 20,114 plan participants at the end of 2024, according to its most recent Form 5500.

“Why would you keep fund like these in your plan?” asks Sanford Heisler Sharp McKnight Co-Chair Charles Field. “What’s going on here that would justify keeping these two funds? We don’t know that. So we made the claim and then we will see if we can survive the motion to dismiss.”

Edward Rueda contributed to this report.