SOURCE: Avatar Associates

Avatar Associates

April 15, 2009 11:30 ET

Avatar Requests Department of Labor to Clarify ERISA Fiduciary Rules Against Self-Dealing Within Proprietary Target Date (Lifecycle) Funds

NEW YORK, NY--(Marketwire - April 15, 2009) - For the last ten years, principals of Avatar Associates have sounded a warning to Congress, regulators, and fund managers: Our industry risks losing investor trust when it strays from basic ERISA requirements to follow prudent procedures and avoid conflicts of interest.

"The aggressive allocations to equities and other volatile securities impacted performance of 2010 and 'In Retirement' lifecycle funds. Congress, naturally, wants some answers," states Larry A. Medin, President of Avatar Associates. Now, the Department of Labor will respond to the request issued by Senator Herb Kohl, Chairman of the Senate Special Committee on Aging, to consider further regulation of target date funds ('The Dept. of Labor, SEC to probe target-date funds,' Investment News 4/3/09). Medin continues, "The answer may not be more regulation, but rather a clarification of the laws already on the books."

A recent Wall Street Journal article questioned if lifecycle mutual fund of funds, in fact, engage in self-dealing and asked how 'target date' funds, which may be mislabeled, increased exposure to equities to the point they became 'target death' funds ('Let's Set a Target, And Date, for Fixing Target-Date Funds,' 4/6/09).

"These questions go directly to a crisis of trust in this environment," states Michael Case Smith, Avatar's head of Institutional Strategies. Smith continues, "Avatar has felt for some time there is a need to get clarity on these issues from the Department of Labor." Medin adds, "Unless we, as an industry, raise the bar on fiduciary safety and remove the appearance of self-dealing, we could lose the privilege of managing America's retirement plan assets."

For these reasons, Avatar requested on March 3, 2009 that the United States Department of Labor issue an Advisory Opinion on the matter of conflicts of interest in lifecycle mutual funds, a copy of which is available at

About Avatar Associates

Avatar Associates is a New York based, independent investment manager and asset allocator, specializing in risk reduction investment strategies. Since 1970, institutional and private clients have entrusted Avatar to help them participate in market advances and protect them against market losses. Ned Babbitt and his first associate, Marty Zweig, a noted investment leader of the day, founded Avatar. They pioneered a number of now widely accepted investment disciplines. Avatar's monetary research was summarized by the financial world as "Don't fight the Fed." Our respect for market information became known as "Don't fight the tape." Today Avatar, a leader in implementing asset allocation strategies with Exchange Traded Funds (ETFs), works with institutions, wrap brokerage accounts, financial planners and advisers, and private clients. Avatar employs a quantitative, top-down, macro-economic model, refined qualitatively by a seasoned research and portfolio management team with one of the longest tenures in the industry.

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