PLANSPONSOR - April - May 2022 - 11

fixed-income fund, and a stable value or
money market fund for principal protection,
Vernon says.
Sponsors may also offer a brokerage
window. This will let participants access
stocks or bonds that hedge against inflation
or invest in products uncorrelated to
traditional stocks. These could include
Treasury inflation-protection securities-
or TIPS-real estate funds and real estate
investment trusts, sources say.
White Labeling
Another means to simplify the investment
menu is to take a white-labeling approach.
Sponsors could white label a fund simply
by removing the provider's name, or they
could offer a single investment that uses
a mix of underlying funds to offer participants
multi-manager exposures to various
assets. This second approach is also a way
to eliminate duplicate funds in the same
style box. For example, a plan sponsor may
offer a single option, which it calls the
Large-Cap Equity Fund, but the assets are
directed to several underlying funds.
" [With white labeling], you have an
investment adviser who's actually taking
care of the review of the funds, and you can
have multiple managers there, " says Robyn
Credico, defined contribution practice
leader, North America, at WTW. " You can
do a lot more interesting things that help
the participants without confusing them. "
She warns, however, that white
labeling can carry heavy costs. Access
is often restricted to plans with assets
of $500 million-plus, due to the cost of
administration.
Rivett says white labeling has begun
to move down-market, through collective
investment trusts. CITs are pooled,
tax-exempt
investment
vehicles
that
commingle assets and are administered by
a bank or trust, which acts as the trustee;
they can allow for more plan flexibility.
Still, a sponsor that turns to white
labeling should have a good justification
because there are " plenty of low-cost index
funds available " in the market, Vernon
says. He says a plan sponsor might want
to first exhaust those options and determine
whether readily available low-cost
index funds meet its employees' needs.
The sponsor also must have enough
assets to make white labeling funds
worthwhile.
" If they do have enough demand for
a white-label fund, and they think the
current availability of low-cost index funds
doesn't meet participants' needs, then
white labeling can be a good idea, " he says.
TIDBITS
Plan Menus by the Numbers
Participants make limited use of large investment lineups.
l Average number of investments held by participants, by plan size
l Average number of investment options offered, by plan size
Overall
5.0 lllll
<$1mm
$1mm - $5mm
>$5mm - $10mm
>$10mm - $25mm
>$25mm - $50mm
>$50mm - $100mm
>$100mm - $200mm
>$200mm - $500mm
>$500mm - $1b
>$1b
22.3 lllll lllll lllll lllll ll
4.3 llll
19.0 lllll lllll lllll llll
5.7 lllll
23.1 lllll lllll lllll lllll lll
5.2 lllll
23.0 lllll lllll lllll lllll lll
5.5 lllll
23.5 lllll lllll lllll lllll lll
4.9 llll
24.8 lllll lllll lllll lllll llll
4.3 llll
22.9 lllll lllll lllll lllll ll
4.4 llll
20.9 lllll lllll lllll lllll
4.8 llll
20.5 lllll lllll lllll lllll
3.6 lll
20.3 lllll lllll lllll lllll
3.7 lll
17.9 lllll lllll lllll ll
Source: 2021 PLANSPONSOR Defined Contribution Survey
Communications
A plan sponsor will want to ensure that
participants use the funds offered to
them, Rivett says. It should make sure
participants understand the choices and
how to work with them.
Plan sponsors cannot just offer a
fund, walk away and expect participants
to do the rest. " As a fiduciary, I don't want
to take the risk of offering investments if
nobody uses them, " Credico says.
-Noah Zuss
PLANSPONSOR.COM April - May 2022 11
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