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Deferred compensation board reviews fund lineup, flags small-cap index timing
Summary
At its Feb. 11 meeting, the Athens-Clarke County Deferred Compensation Board reviewed underperforming funds and the mechanics of watch-list and replacement timing — members asked staff to provide alternatives in advance so the board can act within regular 90-day cycles.
The Athens-Clarke County Deferred Compensation Board on Feb. 11 reviewed performance concerns in its plan lineup and debated the timing of replacing a lagging small-cap index fund.
A staff investment reviewer opened the discussion, saying, “Jeff Cohen apologizes he could not join us this morning. So, I am going to lead us through an investment review.” The presenter identified one large-cap growth vehicle (the BNY Mellon Appreciation Index) as already in the process of being replaced and singled out the BNY small-cap stock index (shown as EISSX/DISSX in the report) for underperformance relative to broader small-cap benchmarks.
Board members pressed the group on the risk of acting too early. The presenter cautioned that the BNY small-cap fund benchmarks to the S&P 600 rather than the Russell 2000 and “if we were to replace it, we would be doing it before it reverts to the mean,” meaning a replacement made in a trough could lock in an adverse timing decision.
Members also raised the Franklin Small Cap fund, which has been on the watch list for multiple quarters and is underperforming year-to-date. Several trustees asked staff and the investment consultant to provide two or three alternative funds for any watch-list candidate in advance of the board meeting so the board can vote within its normal 90-day cycle rather than waiting 180 days for implementation.
The board did not take a formal vote to replace any fund at the meeting; staff noted that vendor-side implementation timelines generally require about 90 days from a decision to completion and agreed to supply comparative options ahead of future meetings.
The investment review also noted the plan lineup remains diversified across asset classes and that, aside from the funds discussed, there were no other immediate fund-of-concern items in the report.
