FORT WORTH, Texas -- American Airlines Inc. is more than doubling the investment options in its $3.3 billion 401(k) plan and is including outside funds for the first time.
It also has switched to daily valuation from monthly.
The move is an effort to match other airlines, which provide an array of investment choices as well as let their employees have access to mutual fund "windows," said William F. Quinn, president of AMR Investment Services Inc., Fort Worth, which manages the plan.
Starting Aug. 1, participants will be able to choose from 26 different funds, up from 11.
"We're trying to put a fund in each of the style boxes," Mr. Quinn said.
Thus, the airline's employees now will be able to choose from domestic large-cap value and growth index funds, domestic midcap value and growth index funds, and domestic small-cap value and growth index funds. The plan also will offer a new international stock fund, two emerging market funds and a technology fund, in which employees will be able to invest up to but not more than 10% of their total assets.
"We want them to have a meaningful weighting (to technology stocks) without speculating on the market," Mr. Quinn said.
The airline's new funds will be drawn from stock mutual funds and institutional portfolios from Janus, Dreyfus Corp., Fidelity Investments, T. Rowe Price Associates Inc. and Berger Associates Inc.
The airline also is adding new American AAdvantage Funds, made up of portfolios from its defined benefit managers, as well as an AAdvantage EAFE fund and an AAdvantage domestic small-cap index fund, which probably will be benchmarked to the Russell 2000 index.
The new American AAdvantage Funds consist of an active, domestic, large-cap growth stock fund, and an emerging markets stock fund.
The airline also is adding an intermediate fixed-income index fund from Fidelity Investments.
It currently offers domestic large-cap, domestic small-cap and international value stock funds, as well as a short-term bond fund, an intermediate bond fund and a balanced fund. The airline's 401(k) plan also has aggressive, moderate and conservative premixed funds, as well as a S&P 500 index fund and a guaranteed investment contract fund.
"We don't do all the things in-house that we are trying to provide," Mr. Quinn explained.
But the airline is steering clear of offering employees the ability to invest directly in stocks through a discount brokerage account.
"We think we've got a responsibility to prudently monitor what we select" and don't think discount brokerage accounts are a good choice, Mr. Quinn said.
In another development, officials are contemplating adding one or more "sector neutral" active domestic equity portfolios to American's approximately $6 billion defined benefit pension fund, Mr. Quinn said. These portfolios would seek to replicate the industry or sector weightings of the index against which each is measured.
Mr. Quinn said pension officials hope to decide by midyear whether to go ahead with the sector neutral portfolios and, if so, how much to invest, and what the appropriate indexes would be.
