Intel Corp. moved to external management for two big investment options that house all of the alternative investments in its $14.85 billion defined contribution plans.
Officials at Santa Clara, Calif.-based Intel hired AllianceBernstein LP, New York, as investment manager for Intel's custom target-date series, with $3.63 billion in assets, and a global diversified fund with $5.82 billion.
The target-date series is the largest component of Intel's $8.19 billion 401(k) plan. The global diversified fund is the biggest option in its $6.66 billion profit-sharing plan.
Intel is one of the most aggressive users of alternatives among DC plans.
Intel had managed the two options internally, setting the target-date glidepath and hiring various firms to manage assets in the target-date funds and the global diversified fund. DC consultants say Intel's switching to third-party management — a so-called 3(38) fiduciary — from its internal management for the custom target-date series is part of a growing strategy among large DC plans.
The percentage of alternative investments in the target-date option varies along the glidepath. The target allocation to alternatives in the global diversified fund is 50%.
The target-date and global diversified fund options incorporate hedge funds, real assets and Treasury inflation-protected securities into the investment mix. The global diversified fund's alternatives menu also includes private equity.
Hiring AllianceBernstein “represents an opportunity to enhance our investment strategy,” said Stuart Odell, assistant treasurer, retirement investments. “AllianceBernstein is a large asset manager with a lot of experience. We want them to bring their investment ideas to our portfolio.”
Intel will continue choosing the underlying managers for five core asset classes — domestic large- and small-cap equity, international equity, global bonds and stable value.
These core asset classes also serve as the “building blocks” for the target-date series and global diversified fund, with AllianceBernstein choosing “whether and which ones to use,” Mr. Odell said.
AllianceBernstein will choose the funds and managers that aren't part of the core asset classes. For the target-date funds and global diversified fund, it will be up to AllianceBernstein to retain, replace or add managers.
“Broadly speaking, we don't expect a lot of changes to underlying managers or strategies,” Mr. Odell said.
Intel will retain responsibility for asset allocation and manager selection for the alternative-investment components within the target-date fund series and global diversified fund, Mr. Odell said.
“Previously, we selected the managers and made the asset allocation decisions for all portfolios,” Mr. Odell said. “Today, we think it makes more sense to have a third party do this for our custom target-date funds and global diversified fund.”