Fund Selection Documentation
At the time of Open Plan implementation, we provide you with a formal Due Diligence Report documenting the selection criteria and procedures utilized in the investment fund selection process. The Due Diligence Report becomes the initial benchmark for ongoing investment fund performance reviews and defines the fiduciary basis for investment fund selection.
Due Diligence Report
The initial Due Diligence Report organizes plan investment funds into five essential categories:
Asset Allocation Analysis
Standard Performance Disclosure
Each section of the report details the specific quantitative data obtained by Morningstar, Inc. and related peer group rankings.
The fi360 Fiduciary Score® Breakdown then provides a peer percentile ranking of each investment against a set of due diligence criteria selected to reflect prudent fiduciary management. Investments are ranked according to their ability to meet due diligence criteria on a monthly basis.
The fi360 Fiduciary Score® Criteria include:
- Inception Date (3 year track record minimum)
- Manager Tenure (2 year track history minimum)
- Assets ($75 million under management minimum)
- Composition (Allocation to primary asset class 80% minimum)
- Style (Current Morningstar style box must match the peer group)
- Net Expense Ratio (Must place in the top 75% of peer group)
- Alpha (Must place in the top 50% of the peer group)
- Sharpe (Must place in the top 50% of peer group)
- 1 Year Return (Must place in the top 50% of peer group)
- 3 Year Return (Must place in the top 50% of peer group)
- 5 Year Return (Must place in the top 50% of peer group)
Once the plans sponsor has determined which investment funds are to be included in the plan, we provide an initial Benchmark Report that establishes the performance benchmark for all plan investments in each of the five essential due diligence categories described above. This initial Benchmark Report is the “starting line” from which all future investment performance monitoring will be measured.
One of the primary fiduciary responsibilities of the plan sponsor is “monitoring of the strategy on an ongoing basis.” The purview of retirement plan “strategy” entails more than the ongoing review of investment performance. Plan strategy includes impacting the potential retirement value for plan participants. This would include minimizing fees and charges incurred by plan participants and maximizing the participant’s functional ability to manage their plan assets to enhance their “retirement readiness.”
We provide quarterly Monitoring Reports that are organized in the same way as the initial Benchmark Report for easy comparison. Monitoring Report detail incorporates all of the data employed in the Benchmark Report, including the fi360 Fiduciary Score® Breakdown.
Watch List. The Monitoring Report includes a Watch List for any funds that do not conform with the fi360 Fiduciary Score® Criteria. Recommended Watch List Action Items can range from a general “continue watching”, to “watch closely” with a specific review period, to “replace”.
Due Diligence Breakdown. For any plan investment fund meriting a replacement recommendation we provide an ad hoc detailed due diligence comparisons between the fund designated for replacement and any suggested alternative funds. The Due Diligence Breakdown includes all of the detail of the initial Due Diligence Report.
Participant Status report
We update the Participant Status Report on an annual basis in order to provide the plan sponsor with details tracking the plan participants’ progress toward adequate Retirement Readiness. If appropriate we conduct participant surveys to identify key issues, such as participant comfort level with utilizing investment and retirement planning resources provided by the plan
SAFE™ Fiduciary Assessment
Assessment results are provided in a written report on an annual basis. All applicable supporting documentation is included in the report.