HARTFORD, Conn. -- CIGNA Retirement & Investment Services introduced a family of 25 commingled funds, the Charter Funds, targeted at the small to midsized 401(k) plan market.
The funds, except for fixed-income allocations, are managed by outside institutional money managers.
CIGNA staff have designed the asset allocations of the portfolios to be very style pure and have selected the "best in class" managers for each asset class, said Michael T. Daley, senior vice president of strategy and marketing.
The funds attracted nearly $400 million in the first month following their introduction in March from existing defined contribution plan clients that added the funds to their investment line-ups. At least 15 other defined contribution plan clients have committed to using the Charter Funds in late summer and fall plan conversions.
Hired to manage portions of the commingled funds were Morgan Stanley Asset Management, Fiduciary Trust Co. International, Berger Associates Inc., Bank of Ireland Asset Management (U.S.) Ltd., John A. Levin & Co. Inc. and Fidelity Management Trust Co., as well as three other managers with which Mr. Daley said CIGNA is still negotiating contracts.
CIGNA Investments Inc. will manage fixed-income investments within the fund family.
Callan Associates Inc. and Ibbotson Associates Inc. will annually review asset allocation and performance of the outside firms hired to manage the funds.
The funds are daily valued, and performance information is available on CIGNA's voice-response system.
The management fees of the Charter commingled funds make them very attractively priced relative to retail mutual funds, Mr. Daley said.
While pricing varies by company, depending on what other services are used and the plan's asset base, the Charter Funds represent substantial savings on average management fees charged by retail mutual funds.
For example, the management fee of a large-company stock fund in the Charter family will range between 90 and 100 basis points; the average management fee for an actively managed domestic large-cap stock retail mutual fund is 130 basis points, according to Morningstar Inc., Chicago.
Most importantly, said Mr. Daley, each fund will be named to clearly describe the asset class and style orientation of the fund, such as the CIGNA Charter Large Company Stock Fund. Employee education and communication materials are being modified to reflect the ease of selecting investment options by their literal description, said Mr. Daley.
"There has been little vendor focus on providing simple and clean 401(k) plan options. Retail mutual funds tend to be loaded up with marketing jargon, even down to their names.
"There is some portion of the universe of 401(k) plan participants that really want name-brand mutual funds. But we have had a warm reception from plan sponsors in the middle market who are more interested in the end result -- retirement security for their employees -- and like the idea of funds that are institutionally managed and are style pure," said Mr. Daley.
Through a mutual fund alliance, CIGNA also offers 30 mutual funds managed by outside managers and 20 internally managed fixed-income commingled funds. Mr. Daley said plan sponsors can offer a mixture of Charter commingled funds and name-brand funds to satisfy both kinds of employee preferences.