Mutual Funds Become Wrappers for ETFs in 401(k)s

Hennion and Walsh, a small New Jersey fund firm, is introducing ETFs into 401k plans by wrapping them in mutual funds.

Chief Investment Officer Kevin Mahn said the SmarthGrowth ETF Lipper Optimal Conservative Index, SmarthGrowth ETF Lipper Optimal Moderate Index and SmarthGrowth ETF Lipper Optimal Growth Index have made their way onto proposals by companies like Fidelity Investments.

The growth fund is the largest of the three, with $14.8 million in total assets and an annual return growth rate of 6.37%. The moderate fund holds $3.6 million in total assets and has a growth rate of 6.66%. The conservative fund is the smallest with only $503,000 in total assets, offering a growth rate of 4.9%. All three funds have fixed-income ETFs as their biggest holdings because of the flat stock market and the current uncertainty of interest rates, Mahn said.

Many fund firms remain hesitant to incorporate ETFs into retirement plans because of the high technological start-up costs.