ALBANY, N.Y. — Board members at the $6.5 billion New York State Deferred Compensation Plan are looking at broadening the plan's use of separate accounts and/or indexed mutual funds.
Julian Regan, executive director of the Albany-based fund, said many of his peers at other large defined contribution plans either are considering moving or have moved their more assets into separate accounts. For example, he said the $12.9 billion San Francisco City & County Retirement System rolled out a series of self-branded funds for participants in its $1 billion DC plan last year.
A separate account consists solely on one retirement plan's assets, invested according to the plan's investment policy.
Mr. Regan sees several reasons why a move toward separate accounts and index funds might be a good idea.
He said indexing, either through mutual funds or separate accounts, would allow plan participants to have a diversified portfolio at the lowest possible cost.
Currently, New York State offers two Vanguard index funds — the Vanguard S&P 500 and Vanguard Bond funds.
Mr. Regan said offering domestic midcap and small-cap core index funds and possibly an indexed international equity fund are what he is thinking about at the moment. Now, the fund has the Alger MidCap Growth Fund, Vanguard Capital Opportunity Fund for actively managed midcap stocks. For small-cap stocks, the current choices are Strong Advisors Small, Columbia Acorn USA and MTB Small Cap Growth funds, all actively managed.
He said the plan's board will also consider using index funds in its lifestyle offerings, which currently are four actively managed Fidelity Freedom Funds added to the stable of options in 2003.
In addition, "risk-based" asset allocation funds might be used instead of the retirement date-based Freedom Funds.