At the Illinois State Employees' Deferred Compensation Plan, Springfield, participants think small. Columbia Acorn's small-cap growth fund, an active U.S. equity mutual fund, has 31% of the 457 plan's total $3.4 billion in assets.
Participants direct their allocations among 27 investment choices, managed by 12 different managers and consisting of 10 U.S. and non-U.S. equity funds, three fixed-income funds, a balanced fund, stable value fund, and 12 lifecycle funds. The Columbia Acorn fund on aggregate is the participants' favorite with $1.04 billion of the plan's assets.
The concentration in a small-cap fund by defined contribution participants is unusual, said William R. Atwood, executive director of the $11.6 billion Illinois State Board of Investment, Chicago, which oversees the deferred compensation plan.
“The general notion that a small-cap growth fund has the largest pool of participant assets is counterintuitive,” Mr. Atwood said.
While “Acorn is a terrific fund, we advise participants they might want to look at diversifying,” Mr. Atwood said. “We cannot coerce participants not to invest in Acorn.”
For five and 10 years, the fund outperformed its Russell 2000 growth benchmark, while underperforming in the 12-month period, all ended May 31, according to a report to the board.
Columbia’s parent, Ameriprise Financial Inc., Minneapolis, in a statement, said, “Columbia Acorn Fund has had the honor of serving plan participants since 1982. During this time the fund has gathered significant assets, a result of strong performance and almost 30 years of service. We look forward to helping participants continue to reach their financial goals for many years to come.”