Get Full Government Meeting Transcripts, Videos, & Alerts Forever!
Get email alerts on the Fund Lineup Changes topic
No spam. Unsubscribe anytime.
Sacramento committee replaces three underperforming plan options after quarterly review
Summary
The Defined Contribution Plans Committee voted June 17 to replace three underperforming investment options — MFS Large Value, American Century Mid Cap Value, and MFS International Diversification — following a fiduciary consultant’s recommendation citing multi‑quarter underperformance and IPS compliance rules.
The City of Sacramento’s Defined Contribution Plans Committee voted June 17 to replace three investment options after reviewing the first‑quarter fiduciary report and a manager‑search process.
Fiduciary consultant Rash Cousineau of Fiduciary Consulting Group told the committee that three funds had been out of compliance under the committee’s investment policy statement for multiple quarters. He identified MFS Large Value (about $56 million; roughly 6 percent of plan assets), American Century Mid Cap Value (about $14.8 million), and MFS International Diversification (about $37.2 million) as the candidates for replacement and recommended specific alternatives. “On that $56,000,000 or so, okay, it’s time to make a change,” Cousineau said.
After committee discussion about benchmarks, fees and implementation timing, members approved the consultant’s recommendations by voice vote. The committee agreed to: replace MFS Large Value with Putnam Large Cap Value; replace American Century Mid Cap Value with T. Rowe Price Mid Cap Value; and replace MFS International Diversification with MFS Blended Research International. The consultant estimated change execution would take roughly 60 days and noted the committee would coordinate participant notifications and the logistics of mapping assets and records.
The replacements follow the committee’s investment policy statement (IPS) procedures: funds that underperform their peer group and benchmark across trailing periods may be placed on watch and, if insufficient improvement appears, may be removed. Cousineau walked members through peer‑group rankings, up/down capture and Sharpe ratio measures to explain why the recommended alternatives were a better fit for long‑term consistency.
Committee members asked about participant impact and communications. The consultant highlighted that Sacramento’s plan fee structure remains competitive — the consultant estimated participants save roughly $1.2 million annually relative to national averages because of prior fee reductions — and said that the changes seek to improve expected long‑term outcomes rather than react to short‑term returns.
The committee did not vote to remove the Nationwide fixed account; staff explained that changing that option would increase record‑keeping fees for the whole plan because of Nationwide’s low record‑keeping arrangement. The consultant also recommended keeping Nuveen Real Estate under observation rather than replacing it immediately.
Implementation notes: the consultant and plan staff said they would coordinate the operational timeline, participant notices and any mapping of assets; the consultant suggested consolidating notifications to participants where feasible to reduce confusion. The committee directed staff to return with any legal or operational issues and noted the typical 60‑day operational window for fund changes.
The committee’s action advances changes to the plan lineup intended to align options with the IPS expectations for net‑of‑fees performance and manager consistency.
