Mutual fund companies acting as retirement plan record keepers “often act in ways that appear to advance their interests at the expense of plan participants,” according to a new issue brief released Tuesday by the Center for Retirement Research at Boston College.
Among the findings is that average annual deletion rates (percentage of times a fund is removed from a 401(k) lineup) among mutual funds affiliated with a plan’s record keeper are significantly lower than rates for unaffiliated funds.
The analysis said it aims to examine the “conflict between the interests of mutual fund companies and plan participants,” by looking at favoritism in setting investment menus in 401(k) plans.
Authors examined approximately 50,000 investment menu changes between 1998 and 2009 and found the average deletion rate across all performance deciles was 13.7% for affiliated funds vs. 19.1% for non-affiliated funds.
Deletion rates among affiliated funds also appear to be less-sensitive to poor performance. Plans removed 13.7% of affiliated funds in the lowest performance decile, compared to 25.5% for unaffiliated funds.
