fred reish

Accurate valuations are critical, especially for private investments. But should fiduciaries really have to scrutinize the valuation methods of an S&P 500 index fund? In Alternative Assets (28), I discuss whether the DOL's proposal creates more work than expected.

Nevin Adams and I did a live podcast from the ASPPA conference in San Antonio. The discussion was wide ranging…from TDFs to forfeitures, and much more…with lots of audience engagement. nevinandfred.com/season-6-ep…

The DOL's proposed Valuation Factor goes beyond private investments. Fiduciaries would also need to consider the valuation practices of traditional mutual funds and CITs. In Alternative Assets (28), I discuss why this requirement may be broader than expected.

If investment managers profit when plans select their products, should fiduciaries take their word for it? That seems like an obvious conflict of interest to me. Yet the DOL appears willing to accept it. Who is this safe harbor really protecting?

The DOL’s proposal may make it easier for fiduciaries to evaluate liquidity restrictions. But does it adequately protect participants? In Alternative Assets (27), I question relying on representations from investment managers who benefit when their products are selected.

I suspect CIT trustees will begin providing liquidity representations, but fiduciaries must still critically review them. Advisers will have an important role in that process. The DOL considers liquidity a fiduciary duty. How do you handle that responsibility?

The DOL's proposal makes evaluating plan-level liquidity relatively simple for mutual funds, but CITs require more steps. In Alternative Assets (26), I examine whether those additional steps encourage meaningful evaluation or simply become a check-the-box exercise.

Must fiduciaries consider the impact of liquidity restrictions? Yes. Easy to say, but hard to do. It’s a burden and benefit analysis, but how do you weigh each? In Alternative Assets (25), I look at the DOL’s guidance and the challenges fiduciaries may face.

Liquidity isn’t just an issue for participants. Plans may need to exit an investment too. In Alternative Assets (25), I look at the DOL’s plan-level liquidity example and why fiduciaries need to weigh the benefits of an investment against the potential burden of getting out.

I agree with the DOL: liquidity restrictions can be appropriate when justified by enhanced value. Are fiduciaries weighing that tradeoff when selecting annuities, stable value funds and other investments with liquidity restrictions?

Liquidity restrictions can be prudent if they’re offset by enhanced value. In Alternative Assets (24), I look at the DOL’s second Liquidity example and why the process of weighing the restrictions against the benefits is ultimately what matters.

The DOL says plans can accept liquidity restrictions when investments offer additional risk or return. But will plans actually restrict participants from daily transactions? I discuss participant-level liquidity in Alternative Assets 23.

Participant access to their 401(k) money is, as a practical matter, baked into the cake. Daily liquidity may not be legally required, but participants expect it. In Alternative Assets (23), I look at what the DOL’s first Liquidity example could mean for fiduciaries.

Should fiduciaries benchmark each fund within a target date fund to see if it underperformed or outperformed? In Alternative Assets (21), I look at what the DOL’s latest Performance Benchmark example could mean for evaluating the funds within TDFs.

A meaningful benchmark should reflect the investment it is measuring. But how closely does it need to match? In Alternative Assets (20), I look at the DOL’s custom composite benchmark example and some of the questions it leaves unanswered.

Can you benchmark an entire target date fund suite, or must each vintage have its own benchmark? In Alternative Assets (19), I look at the DOL’s guidance and whether fiduciaries may need a more individualized approach to benchmarking TDFs.

A comparison is only useful when you’re comparing the right things. In Alternative Assets (19), I look at the DOL’s first Performance Benchmark example and why a benchmark’s strategy, risks and objectives need to align with the investment it’s measuring.

The DOL says fiduciaries should compare an investment’s expected risk-adjusted returns to a meaningful benchmark. Is that your practice? How individualized should the benchmark be? Check out Alternative Assets (18)—DOL Proposal and the Six Defined Factors: Performance Benchmark 1

When is paying more for an investment prudent? The DOL says higher TDF costs may be justified by added benefits, but should fiduciaries also compare those costs to the market? I explored this in Alternative Assets (13)—DOL Proposal and the Six Defined Factors: Fees (5).

The DOL wants fiduciaries to compare investments against "meaningful benchmarks." But what exactly does that mean? In my latest article, I examine the proposed Performance Benchmark factor and why more guidance is needed.