Discretionary Portfolio Management

After reaching mutual agreement on investment guidelines, FCM is retained by the client as the full time specialist with the fiduciary responsibility to make all of the day to day portfolio investment decisions without calling upon the plan sponsor to preapprove those decisions. The plan’s trust has all right of ownership in the assets purchased by FCM on its behalf. FCM provides the client with monthly transaction accounting reports and quarterly management reports to allow oversight. FCM typically meets with discretionary portfolio management clients 1-2 times each year

Stable Value Pooled Fund Management

For smaller retirement clients, typically with $10 million or less in stable value assets, FCM offers the opportunity to access FCM’s portfolio management expertise by participating in one of its pooled collective trust funds. As in a mutual fund, the client purchases units of participation or shares of ownership in the trust. Thereby the plan benefits in the results of the fund as managed by FCM in accordance with the stated objectives for the fund, but the plan does not actually own the assets of the trust nor does it have the ability to define investment objectives that are unique to the plan.

Nondiscretionary Portfolio Advice

For those plan sponsors who are comfortable with the fiduciary responsibility attendant with serving as the investment manager for their stable value fund but nonetheless wish to draw upon the resources and advice of an expert in the field, FCM offers on going nondiscretionary portfolio advice on a retainer basis. Typically FCM is retained on an open-ended basis to assist the plan sponsor in identifying an investment strategy and then implementing that strategy while drawing upon FCM’s credit research and expertise in negotiating contracts. A “Placement Report” to provide documentation for the plan sponsor’s fiduciary files is provided within approximately 30 days after each calendar quarter in which an investment program is carried out by the plan sponsor.

GIC and Synthetic Wrapper Placements

An unbundled service for those plans who may wish assistance for a specific GIC or synthetic wrapper contract purchase. This service is part of what is provided in the ongoing Discretionary, Pooled Fund or Nondiscretionary Portfolio Advice services described above. Specifications are drafted and approved by the plan sponsor. The specifications are published to the universe of potential bidders and an auction market is created for the benefit of the plan. A “Placement Report” to provide documentation for the plan sponsor’s fiduciary files is provided within approximately 30 days after each calendar quarter in which an investment program is carried out by the plan sponsor.

Contract Renegotiations

Since GICs and other pension funding contracts as well as synthetic wrap contracts are individually negotiated to begin with, it is often possible to renegotiate such contracts later if the needs of the plan change over time. FCM will accept assignments to apply its knowledge and expertise in renegotiating such contracts on an unbundled fee-for-service basis or as part of the ongoing Discretionary, Pooled Fund or Nondiscretionary Portfolio Advice services described above.

Issuer Credit Evaluation and Monitoring

As part of the ongoing Discretionary, Pooled Fund or Nondiscretionary Portfolio Advice services described above, FCM has developed a highly regarded proprietary issuer credit evaluation capability to assist in portfolio investment decisions. This expertise may also be accessed on an unbundled basis by plan sponsors who elect to manage their own portfolios.

Fixed Income Investment Management Services

GICs are a type of investment contract issued by insurance companies to tax qualified retirement plans, most frequently 401(k) plans. Other types of investors including endowment funds, foundations, corporate cash managers, defined benefit plans, and even the general accounts of smaller insurance companies are finding fixed income investment contract portfolios managed by FCM an increasingly attractive alternative due to the high quality and very strong performance record of FCM’s portfolios. In this instance FCM will provide much the same service as described above under Discretionary Portfolio Management except that nonbenefit responsive investment contracts will be employed rather than the GICs, BICs and synthetic variants commonly used for 401(k) plans.

Single Premium Annuity Purchases as Defined Benefit Plan Investments or in the Event of a DB Plan Termination

When sponsors of defined benefit plans elect to terminate their plan, they are obligated under law to purchase an annuity from an insurance company guaranteeing to pay the accrued benefits owed each participant under the terms of the plan. FCM’s expertise in negotiating insurance funding contracts in this inefficient market can add significant value by decreasing the cost of the annuity and thereby increasing the asset reversion to the plan sponsor and/or the additional benefit payable to the participants. In addition, when interest rates are high, some plan sponsors elect to purchase annuities as a plan investment to lock in the high returns even when they intend to continue the plan. FCM can add great value as implied above, by taking advantage of the high degree of market inefficiency which can often permit the purchase of both high quality and high returns.

Department of Labor Interpretive Bulletin 95-1

Department of Labor Interpretive Bulletin 95-1 Annuity Quality Assessment Service. DOL Interpretive Bulletin 95-1 requires the plan sponsor to place primary emphasis on the quality of the annuity issuer. Moreover, unless the plan sponsor can demonstrate that they have expertise in assessing issuer quality, they are obligated under 95-1 to retain an expert to provide them with advice in his area. Given FCM’s long experience in assessing issuer quality for both the purchase of both investment contracts and annuities, it is not surprising that a growing list of both plan sponsors and benefits consultants have retained FCM to help them satisfy their obligations under 95-1.

Special Consulting Assignments

From time to time, FCM is engaged for an assignment which does not neatly fall into one of the categories described above. For example, a Fortune 500 company retained FCM to assist them in their search to select a bundled full service 401(k) service provider in recognition of FCM’s broad and extensive knowledge of retirement plan and in particular 401(k) service needs.