Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
While the plaintiffs might have a case, the complaint is not impressive.
As the only example of a "major fund family" competitor that outsources its 401K fund selection process, it gives TD Ameritrade. I don't know about you, but when I think of "major fund families", TD Ameritrade is not at the top of my list. Heck, it doesn't even make the list.
The complaint says, as a fact, not an opinion or conclusion, that "no one investment management firm is good at everything. Some investment management firms excel at providing fixed income investment products, other at equity investment products, and still others at international and emerging market investment products."
I guess that explains why Franklin Funds, for years a good fixed income family, merged with Templeton Funds, a fine international and emerging market family, and subsequently acquired Mutual Series, a well respected equity investment family (with a value emphasis).
Now personally, I'm not convinced that Fidelity, as a fund family, excels at anything. But if its expertise in one area is sufficient (as the complaint seems to concede) then its expertise is sufficient in all - Fidelity exhibits no particular weaknesses (M* rates its domestic/international/taxable bond performance all about the same - between 3.1 and 3.5).
Fidelity tacitly acknowledges that it doesn't have the in-house expertise to manage index and quant funds, as it outsources the day-to-day management of that class of funds to an independent management company, Geode Capital Management. (Geode used to be a subsidiary of Fidelity, but is now an independent company with multiple clients, not just Fidelity.)
A lot of the complaint seems to be based on appeal to "common sense", rather than hard facts and numbers. Yes, Fidelity is an outlier. It offers more funds, more sectors, more of most everything than anyone else. And that makes it even more important to use hard facts, and not just rely on the fact that Fidelity is different in some ways.
It just goes on and on. The complaint says that in principle, target date funds that don't use index funds are fatally flawed by design. It confuses asset allocation (the basis of target date funds) with issue selection (how the underlying funds manage their portfolios).
I haven't read through the whole complaint. But it seems to be cherry picking industry practices, and saying that at each step Fidelity should be doing something different.
Maybe the complaint has merit. Hard to get past all the bluster, though. I'm all in favor of holding the plan companies to a high standard; hard to tell from here what the real facts are.
It's a "kitchen sink" complaint. Whatever they could think of got thrown in. Hence, the failure to select "best of breed" got tossed in with the "too expensive", and the "too many funds" (seriously) claims.
Comments
As the only example of a "major fund family" competitor that outsources its 401K fund selection process, it gives TD Ameritrade. I don't know about you, but when I think of "major fund families", TD Ameritrade is not at the top of my list. Heck, it doesn't even make the list.
The complaint says, as a fact, not an opinion or conclusion, that "no one investment management firm is good at everything. Some investment management firms excel at providing fixed income investment products, other at equity investment products, and still others at international and emerging market investment products."
I guess that explains why Franklin Funds, for years a good fixed income family, merged with Templeton Funds, a fine international and emerging market family, and subsequently acquired Mutual Series, a well respected equity investment family (with a value emphasis).
Now personally, I'm not convinced that Fidelity, as a fund family, excels at anything. But if its expertise in one area is sufficient (as the complaint seems to concede) then its expertise is sufficient in all - Fidelity exhibits no particular weaknesses (M* rates its domestic/international/taxable bond performance all about the same - between 3.1 and 3.5).
Fidelity tacitly acknowledges that it doesn't have the in-house expertise to manage index and quant funds, as it outsources the day-to-day management of that class of funds to an independent management company, Geode Capital Management. (Geode used to be a subsidiary of Fidelity, but is now an independent company with multiple clients, not just Fidelity.)
A lot of the complaint seems to be based on appeal to "common sense", rather than hard facts and numbers. Yes, Fidelity is an outlier. It offers more funds, more sectors, more of most everything than anyone else. And that makes it even more important to use hard facts, and not just rely on the fact that Fidelity is different in some ways.
It just goes on and on. The complaint says that in principle, target date funds that don't use index funds are fatally flawed by design. It confuses asset allocation (the basis of target date funds) with issue selection (how the underlying funds manage their portfolios).
I haven't read through the whole complaint. But it seems to be cherry picking industry practices, and saying that at each step Fidelity should be doing something different.
Maybe the complaint has merit. Hard to get past all the bluster, though. I'm all in favor of holding the plan companies to a high standard; hard to tell from here what the real facts are.