People say something easy is like shooting fish in a barrel. I still don’t understand that expression. Who put the fish there, and why are we shooting them? But whenever another proprietary fund lawsuit appears, that expression comes to mind.
The latest involves Wellington’s retirement plan. A participant alleges that fiduciaries retained underperforming investments, including three Wellington-affiliated funds, and claims losses exceeding $50 million. Those are allegations, not findings, but the setup is familiar.
An investment management company offers its own products to its own employees. Some investments struggle. Plaintiffs’ attorneys ask whether those funds stayed because they were appropriate for participants or because they belonged to the company.
That’s an uncomfortable question, especially when evaluating investments is your business.
I’m not suggesting proprietary funds are automatically bad. Nor does underperformance automatically prove a fiduciary breach. Every investment manager will have periods when results disappoint.
But company affiliation shouldn’t buy a fund extra patience that an unrelated manager wouldn’t receive.
If an outside fund would have been placed on a watch list or removed, your own fund deserves the same treatment. Having the company name on it isn’t an investment qualification.
Fiduciaries need meaningful comparisons, an actual monitoring process, and documented reasons for retaining investments. They also need the willingness to make changes that might embarrass somebody upstairs.
That last part can be difficult. Nobody enjoys telling management that the company’s investment product shouldn’t be in the employee plan.
Still, employee retirement accounts aren’t there to demonstrate corporate loyalty or support the product lineup.
These cases give plaintiffs an obvious story to tell. Whether that story survives scrutiny depends on the facts and the fiduciary process.
Don’t make their story easier by treating your own funds like relatives who can never be fired, regardless of how they perform.