Standard Items Appearing In An Investment Policy Statement

A retirement plan’s overarching goals are to help participants accumulate wealth during their years of employment and to provide them with income during their retirement.

The challenge for fiduciaries is to successfully navigate the options available and build an optimal investment menu that is designed to guide participant choices and improve their retirement readiness. Since plan fiduciaries may be exposed to personal liability, it is prudent to have a process in place for the selection and monitoring of investment options.

Plan fiduciaries should have an established framework on which they can defend their investment decisions should they ever be challenged. The process should begin with the construction of the plan’s Investment Policy Statement (IPS). Although not required by the Employee Retirement Income Security Act (ERISA), drafting an IPS is a fiduciary best practice. The IPS serves as a policy guide that can offer an objective course of action to be followed when emotional or instinctive responses might otherwise motivate less prudent action.

Which investment style has dominated over the long haul, active or passive?

Active vs. passive performance trends have been cyclical, with each experiencing its own periods of dominance. It is widely believed that the Morningstar Large-blend category (stocks in the top 70% of the capitalization of the US equity market where neither growth nor value characteristics predominate) is the most efficient category, or one that would customarily favor passive investing. However, even this category shows the cyclical nature of active and passive performance. Currently, we are experiencing a period of time when the performance of passive large blend funds is trouncing those actively managed.

Which came first––active or passive investing?

Active vs. Passive investing styles is an age-old debate in the investing world. Investment managers on either side tend to be steadfast advocates of the merits of their approach. Active managers seek to exploit market inefficiencies by relying on analytical research, forecasts, and their own judgement and experience to decide which securities to buy, hold, and sell. Passive investing involves simply tracking an index to avoid the management fees and trading costs that can be a drag on performance by adhering to a buy-and-hold strategy.

Active vs. Passive Investing Styles: An Age Old Rivalry

Active vs. Passive investing styles is an age-old debate in the investing world. Investment managers on either side tend to be steadfast advocates of the merits of their approach. Active managers seek to exploit market inefficiencies by relying on analytical research, forecasts, and their own judgement and experience to decide which securities to buy, hold, and sell. Passive investing involves simply tracking an index to avoid the management fees and trading costs that can be a drag on performance by adhering to a buy-and-hold strategy.

In Active vs. Passive Investing Styles: An Age Old Rivalry, SBS traces the origins of the active and passive investing styles, dives into the historical performance and asset flow trends of each, and addresses how plan sponsors can make prudent decisions about employing each investing style.

Complete the form below to download your copy today. If you have any questions, or would like to begin talking to a retirement plan advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.

Key Retirement and Employee Benefits Compliance Reminders for September

Due September 15th

• Extended due date for filing corporate tax returns and deductibility of contributions.

Due September 30th 

• Medical Loss Ratio (MLR) rebates due for the 2014 reporting year and beyond.
• Summary Annual Report due to participants, assuming filing of Form 5500 was not extended.

Download the full 2017 Retirement and Employee Benefits Compliance Calendar.

If you have any questions or would like to begin talking to an advisor, please get in touch by calling (855) 882-9177 or e-mail us at sbs@hanys.org.