When investment returns are sinking, pension fund executives especially need to look at ways of increasing incremental income and keeping more control of costs.
Cost control extends to 401(k) plans as well as defined benefit funds. Investmark Inc., Pittsburgh, reported early this month a troubling finding regarding 401(k) sponsors. The firm estimates 75% of sponsors "are unaware or unfamiliar with `hidden' costs and fees embedded in their plan."
More traditional places for defined benefit sponsors to seek incremental investment return include securities lending and options overwriting. Securities lending income might depend on market conditions. Options overwriting strategies, popular in the 1980s, might be ripe for renewal in a lackluster market.
Among other fees and expenses, sponsors should scrutinize brokerage commissions and costs of trading execution. Both could be affected to the extent a sponsor uses directed brokerage or commission recapture, neither of which necessarily leads to lower overall costs, despite their appearances of returning some money to sponsors.
