Recently one of my investment providers stated that they were closing down one of their investment options. This was not good news to me as I use this investment option in 90% of my 401k plans! The avowed reason is that they were not getting the cashflow they needed to make this investment option profitable. I also suspect the current political climate is making their business case challenging.
Against that backdrop, I have been talking with other investment providers to see if they might fill this particular slot. What has followed is a veritable onslaught of charts, graphs, in-depth conversations, PowerPoint decks thick enough to choke a horse, and all the while accompanied by competing choruses of "Pick me! Pick me!". Shades of Donkey in Shrek?
I was reflecting on this as I watched Round 1 of the NFL Draft. 32 teams are trying to find the "silver bullet" player(s) that will lead their football team to a Super Bowl. Each team has agreed to play by the football rules. Each team competes in a division, a conference, and ultimately, a league. Each team fields the best players it can and employs what they hope is a winning strategy.
Beyond that, it is up to skill and talent, coaching, and perhaps luck (ie, less injuries than other teams) as to how a football team performs. This really struck home to me as I thought about the closing investment. The investment manager put out what they felt was a winning strategy in 2017. They defined how they saw this slice of the market (ie. "to" versus "through"). They gathered the best minds they could marshal and fielded their team. Much as in football, it is challenging when things do not work out right in spite of talent and correspondingly, rankings versus peers.
As I read yet another deck, it occurred to me that ultimately, my decision comes down to a defendable and repeatable process as proscribed by the Department of Labor. What do the numbers say? What do the statistics say? Everything else - number of analysts, years of experience, differing investment philosophies - is captured in the performance numbers and statistics.
The Parting Glass
I will review one more data point and then make a decision. That will be communicated out to my plan sponsors this evening. And if anyone asks how I arrived at this decision, rather than bore them to tears with a description of the number of hours/ decks/ Zooms, I will simply say, "A defendable and repeatable process per the Department of Labor".