Deals & People December 1, 2006

Great-West Sweeps Up More 401(k) Business

U.S. Bank Institutional Trust&Custody has agreed to sell its bundled 401(k) plan business to Great-West Retirement Services, but is keeping its defined benefit business.
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The company said in a press release that it will also retain its trust, custody, non-qualified plan and health savings account businesses. US Bancorp, the parent company of U.S. Bank, beefed up its trust and custody business last year with the purchase of Wachovia Corporation’s corporate trust and institutional custody operations.

“The acquisition of the Wachovia institutional custody business demonstrates our commitment and willingness to invest in this business,” said Diane Thormodsgard, president of U.S. Bank, in the press release. “The sale of the 401(k) business allows us to concentrate our focus and resources on businesses where we have significant scale and/or opportunity for growth.”

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She said the company didn’t have enough bulk in the 401(k) business to ultimately make further spending worthwhile. “By industry standards today, a book of two to three million participants is necessary to support continued investment,” Thormodsgard continued. She said U.S. Bank had approximately 195,000 participants.



Followingthetransaction,Great-WestRetirementServices will provide 401(k), 401(a), 403(b)and457retirementplanservicestomorethan21,000plans representing nearly 3.5 million participants with more than $104 billion in assets, according to the announcement, which said the terms of the deal were not disclosed.

Great-West has been moving aggressively to become a bigger player in the retirement business, especially on the DC side.

The company snagged the 401(k) and defined benefit business of Metropolitan Life Insurance Company in June, an agreement that includes nearly 2,600 plans and $7.5 billion in assets. The purchase of MetLife’s business nearly doubled the number of participants in Great-West’s full-service 401(k) business.

In 2005, Federated Investors revealed plans to sell its recordkeeping operation to Great-West.

The Markets December 1, 2006

Morningstar Makes Collective Investment Trusts More Comparable to Mutual Funds

Morningstar, Inc., announced Wednesday it will collect net returns, in addition to the gross returns, for its collective investment trusts and will provide monthly rankings and Morningstar Ratings against a peer group of mutual funds.
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Morningstar currently compares collective investment trusts to separately managed accounts, using gross returns to provide a quarterly rating, according to a press release from the company. Under this new framework, which will be implemented in early 2007, investors and advisers will be able to more accurately compare collective investment trusts to mutual fund offerings in retirement plans and will have access to timelier, more transparent information.

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“Standard industry practice has been to treat collective investment trusts as ‘separate accounts,’ using gross returns and not to request monthly data from providers,” said John Rekenthaler, vice president of research for Morningstar. “Because these investments are direct competitors with mutual funds in retirement plans, however, we think it’s more appropriate to give them more prominence and put them on a level playing field with mutual funds.’

The new collective investment trust rating will use the same methodology as used in the Morningstar Rating for mutual funds, ranking them against their comparable mutual fund peer group based on risk-adjusted net returns. However, in order to be eligible for a “star rating,’ collective investment trusts must provide three years of monthly net returns in addition to portfolio holdings.

With its recent acquisition of the database division of InvestorForce, Morningstar now has data on approximately 650 collective investment trusts.

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