A recent study of 73 large DC plans showed that 24% employed white label options, with just less than half of this group offering an all-white-label lineup.
Among those choosing white label options, 71% said they combined multiple managers under one option; 64% said the white label approach gave them flexibility to change managers; 57% said this strategy helped participants better understand their choices; and 43% said they acted to lower fees. (Respondents could choose more than one answer.)
In an effort to simplify its $630 million 401(k) plan, Hanesbrands Inc., Winston-Salem, N.C., switched its whole investment lineup to a white label approach, said Kendall Frederick, senior manager, treasury planning and analysis.
For example, the plan had three large-cap equity funds before switching to white labeling in June. “We told participants, 'You pick the asset allocation and we'll pick the best managers,'” he said, noting there were few complaints.
The lineup now contains four multimanager options and three single-manager options, as well as the company stock fund and a target-date fund series.
Hanesbrands also has a frozen $750 million defined benefit plan. “We do leverage some managers from the defined benefit plan to the 401(k) plan,” said Mr. Frederick. Of 20 managers for the DB plan, six manage strategies in the DC plan.
Executives at DC plans with $500 million or more in assets are talking to Callan Associates Inc. about “at least getting one white-label fund” into their investment lineups, said Lori Lucas, the firm's Chicago-based executive vice president and defined contribution practice leader.
“Some want to white label everything, including a custom target-date fund,” Ms. Lucas said. She predicted a “slow, upward trend” of white-label adoption by DC plans.
Moving to a core menu of white-label funds was part of an investment menu overhaul of the $2.3 billion 401(k) plan at Farmers Insurance Inc., Los Angeles, said Anthony Tomich, head of pension investments.
“We wanted to simplify the plan because a lot of participants said they were confused and needed some help,” Mr. Tomich said. Internal research showed some participants had all or most of their money in a single option or had spread their money over all of the options.
“We wanted to make the plan more cost-efficient and we wanted some innovation in the investment structure,” said Mr. Tomich, referring to the changes that took effect in July 2013.
The old structure had 11 core options, most of which were mutual funds that “were really expensive,” said Mr. Tomich. White-label options are “significantly cheaper,” but he didn't elaborate on costs.
Now, white-label core investments feature a pair of passively managed options and a trio of actively managed options. The stock index option and the bond index option have single-managers. The actively managed stock option has five managers, the actively managed bond option has three managers, and the actively managed stable value fund has one manager.
Exelon Corp. introduced three white-label options to its $6.2 billion plan on July 1 as part of a restructuring. “We wanted to streamline the investment menu and simplify it,” said Cindy Cattin, director of investment options and risk management. “We wanted to increase diversification of the investments.”
The restructured Exelon plan has some single-manager collective investment trusts but the white-label options, all actively managed, are a first for Exelon. They include a domestic equity option with eight managers focusing on large-cap, midcap and small-cap stocks, and an international equity strategy with six managers pursuing developed and emerging markets. There's also a white-label fixed-income fund with four managers.
Exelon is using money managers from its $14.7 billion defined benefit plans and $2.5 billionvoluntary employee beneficiary association “We wanted to leverage their scale,” she said.
