PLANSPONSOR - August/September 2018 - 48

INVESTMENT FOCUS
Fund
Change
Bringing white label
investments and CITs
to plans of all sizes
O
ver the past 30 years, defined
contribution (DC) plans have
become the primary source of
retirement income for many American
workers. Plan sponsors, accordingly, must
acknowledge the importance of a welldesigned
DC plan, observes Joel Lieb,
director of defined contribution at consultants
SEI in Oaks, Pennsylvania.
" Sponsors recognize they need to
raise the level of investment oversight
and put together DC programs that are
as institutionally focused as traditional
defined benefit [DB] plans, to prepare
participants for future events, " he says.
Meeting this goal requires understanding
work force demographics and
income liabilities, designing an optimal
selection of investments that takes those
into account and presenting it to participants
in a way that guides the best choices.
Off-the-shelf investment products based
in mutual funds may not be a good fit,
Lieb notes. " DC plans can bring better
outcomes to participants at a lower cost to
the plan by employing white label options
and collective investment trusts [CITs]. "
White label investment options and
CITs are two distinct items in the DC
sponsor tool kit, although their applications
can overlap. Simply put, a white label
investment option bears a name of the
sponsor's choosing, typically to identify
the option with its investment objective
rather than the brand name of an investment
manager. White labelling also can
combine several funds into one option.
A collective investment trust is a vehicle
that, when compared with conventional
'40 Act [Investment Company Act of 1940]
mutual funds, provides asset managers
and plan sponsors with greater flexibility
on fees and operations, and more efficient
management of the assets.
For defined contribution plan sponsors,
white label funds aid in streamlining
fund menus. " Stripping away
the fund and manager identification
and focusing on the fund objective-
'diversified global equity,' for instance-
gives the participant a clearer idea of the
fund's purpose, " says Susan Czochara,
head of retirement product strategy for
Northern Trust Asset Management in
Chicago. Indeed, mutual funds named
48 PLANSPONSOR.com August-September 2018
Art by Mark Todd
after old sailing ships, or mountains,
or celestial bodies may not reveal much
about their investment intentions.
White labelling is becoming increasingly
effective, as a result of participants'
evolving view of investments. In Northern
Trust's recent surveys, Czochara reports,
" Performance is top of mind for both
retirees and current workers. The next top
priority for retirees is who manages the
fund, but current workers see the fund
objective and fees as more important. As
the work force turns over, I think we'll see
a focus on what a particular fund is going
to provide participants in their portfolios. "
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PLANSPONSOR - August/September 2018

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