Strange fund offering in 401K, what is it?

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lcrock
Posts: 10
Joined: Thu Jul 11, 2013 4:22 pm

Strange fund offering in 401K, what is it?

Post by lcrock » Wed Jan 06, 2016 11:32 pm

Hello,
My workplace 401K is offering some "funds" from SSGA, part of the new 401K for 2016 (cheaper for the company). A few of them are index based and have a very low expense ratio. They state right up front that they are not mutual funds, I'm not sure what they are. There is very little information on them and they do not have prospectus. I've been in them for a couple of months and I noticed there are no dividend distributions, which is unlike any other fund that I own. I asked the company HR rep and he has no idea, and has to talk to his counterpart at the company that is managing it.

For one particular example "fund", which is State Street S&P 500® Index Non-Lending Series Fund Class K, the expense ratio is 0.02%. Is it possible that it is that low because they are keeping the distributions? The documentation that is available has no distribution information whatsoever. I've requested more, hoping to get it soon.

Does anyone know what this is? Is this a normal type of "fund"? Our previous 401k was nice and simple, a good offering of vanguard funds plus the obligatory age-based funds. Relatively easy to research and understand.

Thanks for any help!

nyclon
Posts: 242
Joined: Fri Oct 02, 2015 5:30 pm

Re: Strange fund offering in 401K, what is it?

Post by nyclon » Wed Jan 06, 2016 11:40 pm

lcrock wrote:Hello,
My workplace 401K is offering some "funds" from SSGA, part of the new 401K for 2016 (cheaper for the company). A few of them are index based and have a very low expense ratio. They state right up front that they are not mutual funds, I'm not sure what they are. There is very little information on them and they do not have prospectus. I've been in them for a couple of months and I noticed there are no dividend distributions, which is unlike any other fund that I own. I asked the company HR rep and he has no idea, and has to talk to his counterpart at the company that is managing it.

For one particular example "fund", which is State Street S&P 500® Index Non-Lending Series Fund Class K, the expense ratio is 0.02%. Is it possible that it is that low because they are keeping the distributions? The documentation that is available has no distribution information whatsoever. I've requested more, hoping to get it soon.

Does anyone know what this is? Is this a normal type of "fund"? Our previous 401k was nice and simple, a good offering of vanguard funds plus the obligatory age-based funds. Relatively easy to research and understand.

Thanks for any help!
Here you go: viewtopic.php?t=112945

Regarding the dividends, they are added back to the NAV.

lcrock
Posts: 10
Joined: Thu Jul 11, 2013 4:22 pm

Re: Strange fund offering in 401K, what is it?

Post by lcrock » Thu Jan 07, 2016 12:29 am

Thanks for the reply and the link. Interesting. Could you explain a little more about the dividends being added back to the NAV? Does this mean the NAV should increase by whatever the dividend rate was for the year, like roughly 2+%?
Thanks again.

nyclon
Posts: 242
Joined: Fri Oct 02, 2015 5:30 pm

Re: Strange fund offering in 401K, what is it?

Post by nyclon » Thu Jan 07, 2016 12:52 am

lcrock wrote:Thanks for the reply and the link. Interesting. Could you explain a little more about the dividends being added back to the NAV? Does this mean the NAV should increase by whatever the dividend rate was for the year, like roughly 2+%?
Thanks again.
Sure, you're welcome. This http://www.ssgafunds.com/product/fund.seam?ticker=SVSPX shows the fund objective as "The SSGA® S&P 500® Index Fund seeks to replicate the total return of the S&P 500® Index." Notice it says "total return" - this means the fund aims to mimic the s&p 500s performance inclusive of dividends.

Of course, the link above is not for your specific share class but the objective would be the same for your share class. To be sure you can contact State Street and ask the question directly regarding dividends.

One other exercise you can perform to check that dividends are being included in the NAV is the following:
Find the NAV of your fund offering from each Dec 1st and Jan 1st.
Next take the price of SPY from each Dec 1st and Jan 1st.
For each, compare the % return between Jan 1st and Dec 1st. The SPY figure should be lower because the price will be ex of the dividends. Adding the December distribution back to the SPY price will get you roughly (but not exactly due to various factors) to the same % return as the SSgA fund.

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Watty
Posts: 13439
Joined: Wed Oct 10, 2007 3:55 pm

Re: Strange fund offering in 401K, what is it?

Post by Watty » Thu Jan 07, 2016 1:00 am

I had "separate accounts" (Google this) like this in my 401k so this is not unusual.

There will likely be a chart somewhere in the literature that gives the performance for 1,5, and 10 years. You can compare that to something like the Vanguard S&P 500 funds numbers. They should only vary by the funds expense ratio. Be sure that they are using the same "as of" date.

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