The Supreme Court heard oral arguments on October 6 in Anderson v. Intel Corporation Investment Policy Committee, examining what constitutes a “meaningful benchmark” when participants challenge retirement plan investments based on alleged underperformance.
The case involves challenges to Intel’s retirement plan investment strategy, including allocations to hedge funds and private equity. Participants alleged that the approach hurt investment performance. Intel argued that its investments were intended to reduce volatility and protect against market downturns following the 2008 financial crisis.
The Ninth Circuit upheld dismissal of the lawsuit, finding the participants’ investment comparisons inadequate. The Supreme Court is considering whether, and how, participants must identify a meaningful benchmark to survive a motion to dismiss when alleging investment imprudence based on underperformance.
During oral arguments, several justices pressed the attorneys to explain what makes a benchmark meaningful. The discussion explored whether comparisons adequately account for differences in investment objectives, strategies, and risks. The participants’ attorney also argued that performance allegations should be considered alongside other allegations concerning the fiduciaries’ investment decisions.
For me, the issue is straightforward, even if the legal standard isn’t. You can’t automatically judge a strategy intended to limit volatility against a more aggressive strategy simply because the aggressive strategy made more money during a bull market. With hindsight, finding a better performer is usually easy.
At the same time, having a different investment strategy shouldn’t give fiduciaries an unlimited excuse for disappointing results. The reasons for selecting and retaining an investment still need careful examination.
The Court hasn’t issued a decision, and questions during oral arguments aren’t a ruling. Plan sponsors and advisors should follow the case because the eventual decision could affect how investment underperformance claims are pleaded. Meanwhile, selecting appropriate benchmarks and documenting investment review remain practical steps that shouldn’t depend on how this litigation ends.