Speaking at PLANSPONSOR’s 2 nd annual 403(b) Summit in Orlando, Florida, Phillip Senderowitz, Chief Investment Officer, Chepenik Financial, said that in setting the investment lineup for their plans, sponsors should consider the participants – their range of investment knowledge, risk tolerance, and desire for involvement.
Donald Stone, President, Plan Sponsor Advisors, added that to offer participants diversification it is not necessary to offer a large number of funds, but different types of funds. The lineup should consist of asset classes that move in different directions.
However, Senderowitz advised Summit attendees not only to consider the strategy of funds, but also the cost.
Stone also suggested sponsors use their existing menu to create target date or target risk funds for participants. He says sponsors should have an honest conversation with their vendors about what they need and want and see if the vendors will work with them.
A good tool to use in benchmarking plan investments, according to Tom Blanchar, 403(b) & 457 Product Manager, The Standard, is an investment policy statement - a detailed document of investment goals and processes and types of investments the plan will use. Senderowitz added that sponsors should keep detailed documentation of the investment selection process and why funds were or were not chosen also.
Stone told attendees that they should have an investment committee that will monitor the plan's investments and ensure compliance with the investment policy statement. An investment manager review is also a good idea, according to Blanchar.
Finally, Sederowitz advised sponsors who don't know much or want to keep down costs to go with passive management over active management - select an S&P or other index and try to match it.