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February 17, 2003 12:00 AM

DC Briefs: DFA launches lifestyle funds of funds

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    SANTA MONICA, Calif. - Executives at Dimensional Fund Advisors have a bright idea for defined contribution plan sponsors at a time when other managers are becoming disillusioned with that market.

    The company plans to launch balanced portfolios targeting defined contribution plan sponsors, incorporating up to 15 mutual funds already selected by DFA, said David G. Booth, chairman and chief executive officer. Plan sponsors will be encouraged to feature these portfolios as default options, replacing money market funds, and they would be presented to participants as a "one-stop" investment for all their money. The question, Mr. Booth acknowledges, is whether DFA can get institutions to champion the idea.

    The funds of funds range from conservative to moderate, and they can be used by participants who want to invest their assets in a reliable strategy instead of mixing and matching themselves, he said.

    According to a 2001 study by Hewitt Associates LLC, Lincolnshire, Ill., 35% of defined contribution plans offer a lifestyle fund. Participants in those plans allocated 36% of assets to the lifestyle funds, but those participants often allocate at cross purposes, investing half of their money in a conservative option and the other half in an aggressive one, noted John C. Siciliano, DFA's director of global institutional services. The long-term returns of many lifestyle funds, relative to the risk, have been better than those of more conservative investment options such as money market funds, he added.

    Defined contribution plan participants need these balanced fund options because despite the growing number of funds at their disposal, they are lousy investors, Mr. Siciliano said.

    "Too often we see the defined contribution area looks like a gambling casino," Mr. Booth explained. "We do not think it does any good to manage your investments in a gambling casino."

    DFA officials are in the early stages of talking to their large institutional defined benefit clients about using the strategies, Mr. Siciliano said. Executives hope sponsors will see the firm as the "old reliable" of the money management business and get behind the investment choice.

    Hyatt Corp. to look at defined contribution lineup

    CHICAGO - Hyatt Corp. plans to review the investment options in its $400 million 401(k)/profit-sharing plan, said Thomas M. Costley, corporate director of benefits. The board will meet at the beginning of March to determine the details of the study.

    He said pending the results of the study, plan officials might decide to add target-date funds - asset allocation funds whose mixes are based on a participant's retirement date - to the lineup of 11 investment options. T. Rowe Price is bundled provider. The review and fund selection will be handled internally, he said.

    Ameritas reviews 401(k)/profit sharing options

    LINCOLN, Neb. - Ameritas Holding Co. is reviewing the investment options in its $121 million 401(k)/profit-sharing plan, said Kent Mattson, assistant vice president-compensation and benefits. The annual review will be finished by the end of the first quarter. The plan, which is run internally, has 21 investment options, he said. It is not using a consultant.

    J.F. Shea reviews DC plan investments

    WALNUT, Calif. - J.F. Shea Co. Inc. is conducting a review of the 13 investment options in its $84 million 401(k)/profit-sharing plan, said Hazel Wong, manager-compensation and benefits. It will be completed in March, she said. MassMutual is bundled provider; the plan is not using a consultant.

    Valassis to look at plan's investment options

    LIVONIA, Mich. - Valassis Communications Inc. in April will begin a review of the 16 investment options it offers in its recently combined 401(k)/profit-sharing plan, which has $96 million in assets, said Mary Stencel, benefit plan supervisor.

    Plan officials will complete the review by June; no consultant will be used, she said.

    J.P. Morgan/American Century is bundled provider.

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