Participants and beneficiaries of the CenturyLink Dollars & Sense 401(k) Plan have alleged mismanagement of a custom investment option – the “Active Large Cap U.S. Stock Fund” – offered within the Plan. The fund’s objective is to exceed the return of the Russell 1000 Index using an actively managed multi-manager approach. CenturyLink’s subsidiary, CenturyLink Investment Management (CIM), serves as investment fiduciary. Plaintiffs claimed that the large-cap fund has consistently underperformed its benchmark, due to the flawed construction of the fund itself, for which CIM is responsible. Six different investment managers are employed, all with the same mandate, with one passive manager and five active managers. In short, plaintiffs argued that it is unreasonable for plan fiduciaries to assume that five active managers would outperform the benchmark given the efficient market represented by large-cap domestic equities. The court ruled that the plaintiffs did not have a standing, as they cannot simply claim that a “prohibited” investment harmed participants, especially having not claimed their own investment in the fund.
www.planadviser.com; December 6, 2017.