Traditionally, 401(k) sponsors have either corralled company matches into company stock or into the investment choices the participant selected. Instead, SponsorMatch is designed to improve the usage of the money that fund sponsors match to a worker’s 401(k) contributions by putting it into three types of investments via a single fund that is packaged like a target-maturity fund.
However, unlike a target-maturity fund that invests in a wide array of stocks, bonds and, in some cases, alternative investments, SponsorMatch invests in just three types of portfolios. The first, the most aggressive, is alpha-generating, i.e. seeks to deliver above-market returns. The second, beta-oriented portfolio seeks to match market returns. The third is a deferred annuity that will provide investors with guaranteed lifetime income in their retirement. As an investor ages, the amount of money put into the annuity increases.
The inspiration for SponsorMatch was to provide investors with the types of guarantees associated with pension plans but typically not available in 401(k)s.
“We created this category with the goal of providing a more direct way for plan sponsors to help improve investment outcomes for future retirees,” said Kristi Mitchem, head of the U.S. defined contribution group at Barclays. “What is exciting about SponsorMatch is that it is a very innovative solution designed to improve the utilization of a familiar feature in 401(k) plans--the company match. To the participant, it looks very much like a target-maturity date fund. However, the investment technology underlying the fund is much more sophisticated and provides results that are more like a traditional pension plan.”
