NEPC’s white paper, “Reimagining Managed Accounts for Defined Contribution,” was recently featured in a PlanSponsor article, which highlighted NEPC’s findings that high fees on managed accounts can diminish their value, and fees above 30 basis points may necessitate higher risk to achieve returns comparable to more affordable alternatives like target-date funds. View the full article on PlanSponsor’s site here.
While defined contribution retirement plan sponsors have increasingly showed interest in offering more personalized retirement investments to their participants, widespread access to managed accounts has yet to be achieved.
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“However, a recent NEPC paper found that high fees tend to erode the value of managed accounts, as a fee of 30 basis points typically requires a participant to increase their equity exposure by 20% to 30%, or by two to three TDF vintages, to achieve a similar net-of-fee return. In addition, for participants paying a lower fee of 15 basis points, for example, NEPC argued that they could anticipate returns comparable to a typical TDF investor. Even with the advice component of managed accounts, NEPC found that the added value of that feature declined over time.”
Click here to read the full article on the PlanSponsor site.