Intel 401(k) Plan Fiduciaries Win Lawsuit Challenging Alternative Investments
In their search for above-market returns, 401(k) Plan fiduciaries may be tempted to look for alternative investment options to the traditional mutual funds and collective trusts that largely dominate 401(k) Plan investments—options such as hedge funds and private equity. Fear of lawsuits might hamper adoption of such novel investments. On January 21, a federal judge in California just gave a significant win for fiduciaries contemplating such investments.
In Anderson v. Intel Corp. Investment Policy Committee, the plaintiffs challenged in the asset allocation model in investment fuds that allegedly allocated excessive assets to hedge funds and private equity investments. The Plaintiffs alleged that these investments had higher fees and greater risk than what prudent, alternative investments had
Relying on authority developed in the now-common 401(k) fee cases, the Court held that the Complaint’s general allegations that the fees were higher than market rates and that the investment options were not generally used by 401(k) plans were not sufficient to allege a plausible claim that could proceed to the discovery phase. The Court also rejected the plaintiffs’ attempt to allege that the investment underperformed, finding that the plaintiffs’ proposed benchmarks were an attempt to compare apples to oranges.