In spring 2021, members with self-directed accounts invested at Fidelity will see a change to their choice of investment funds. Additionally, some members will see their assets transfer to a new fund, as their current investment choice will no longer be available. This post will describe the motivation behind these fund lineup changes. But broadly speaking, FPPA has elected to change the lineup to remain consistent with our investment philosophy and fulfill our fiduciary responsibility.
FPPA’s mission is to provide our members with a secure retirement. As a fiduciary, FPPA has a legal and ethical duty to make investment decisions solely in our members’ best interest. It is a charge that we take very seriously; and one that is even present in FPPA’s published mission and vision statements.
So, what investment funds are changing, and what action do members need to take? Read on to learn more.
Which investment funds are changing?
Target Date Funds: moving from mutual funds to CITs
Members invested in Vanguard Target Date funds will see the fund type change from a mutual fund to a Collective Investment Trust, or CIT. Like mutual funds, CITs are large pools of investment assets, managed together according to a common strategy. CITs, however, are only offered to certain qualified institutions and often come with added benefits like lower fees. In this case, the transition will result in a 16.7% reduction in fees for members invested in this fund.
Please note that Vanguard remains the manager of these funds, and only the investment vehicle type is changing.
Stable Value Fund: moving from Wells Fargo to T. Rowe Price
The FPPA-offered stable value fund will be changing providers, from Wells Fargo to T. Rowe Price. The Wells Fargo fund has seen major turnover in its management group, resulting in the fund potentially being exposed to greater risk and uncertainty regarding future returns. In response, FPPA has opted to change its offered stable value fund to T. Rowe Price, which has demonstrated similar investment returns, but with less turnover and associated risk.
One additional note for participants currently invested in the Wells Fargo stable value fund: Due to fund requirements, assets invested in this fund prior to May 14 will remain in the Wells Fargo fund after the transition occurs. But, if desired, these funds can be reinvested as the account owner sees fit, including moving them to the T.Rowe Price Stable Value Fund. Any new allocations to the stable value fund after the transition date will be invested with T. Rowe Price.
American Beacon Large Cap Value Fund: changing to a less expensive share class
Similar to the Vanguard Target Date Funds, this offering will change because FPPA’s invested assets qualify us for a different share class with lower rates.
When will this transition occur?
The fund offerings will change on or around May 14th, 2021.
What action do FPPA members need to take before, or after, the transition?
In short, affected members don’t need to do anything. There’s no need to sign or authorize anything. When you log in after May 14th, your assets will have transferred to the comparable new fund offering.
Prior to the transition, all impacted members will also receive communications from Fidelity to explain the lineup changes in greater detail.
Why change FPPA’s fund lineup?
In short, this comes back to FPPA’s fiduciary oversight role towards members’ self-directed plans. A critical portion of this duty is to ensure we’re providing high-quality, low-cost investment options for members. After review, we determined that these fund lineup changes are beneficial to members in a way that fulfills that responsibility.
Ryan Woodhouse is a Digital Content Specialist for the Fire & Police Pension Association of Colorado. When not authoring content for FPPA, Ryan can be found fly fishing in the Colorado high country or shouting at the TV during University of Wisconsin football and basketball games.