Invesco sued for 'indiscriminately' loading 401(k) plan with in-house funds

At least 93% of the funds in the Invesco 401(k) plan are proprietary investments, according to the plaintiffs

Jun 4, 2018 @ 2:22 pm

By Greg Iacurci

Invesco has been sued for allegedly stacking its 401(k) plan with proprietary investments, joining the ranks of more than 20 asset managers who have had to defend against similar claims of mismanagement by employees seeking to claw back lost retirement savings.

Diego Cervantes, a participant in Invesco's 401(k) plan, claims the company used investors in the company retirement plan "as a captive market for Invesco's proprietary investment products" in order to earn "lucrative fees" and boost assets under management.

Mr. Cervantes claims that, between May 2012 and the present, 93% to 95% of the funds in the roughly $875 million retirement plan were affiliated with Invesco and that many performed worse or had higher fees than similar, unaffiliated funds.

Further, the plan offered approximately 150 to 205 investment options during that time period, far more than the average 401(k) plan, which typically has 10 to 15, the plaintiff said.

"Defendants indiscriminately dumped Invesco mutual funds, [exchange-traded funds], and other investment products into the Plan in breach of their fiduciary duties," according to the lawsuit, which was filed in the U.S. District Court for the Northern District of Georgia.

Invesco spokeswoman Jeaneen Terrio declined to comment on the allegations, saying the company doesn't comment on litigation matters.

Several asset managers have been sued in recent years over use of in-house funds in their respective 401(k) plans. The defendants have primarily been those that, like Invesco, use actively managed investment strategies.

Examples include Franklin Templeton Investments, TIAA, New York Life Insurance Co., T. Rowe Price, Wells Fargo & Co., Capital Group, MFS Investment Management, Allianz Asset Management, JPMorgan, Waddell & Reed, American Century Investments and Putnam Investments.

Judges have dismissed a few cases, including those involving Wells Fargo, Putnam and Capital Group, but most have been allowed to move forward and are still pending. Other companies, such as Allianz, TIAA and New York Life, have settled their lawsuits, for $12 million, $5 million and $3 million, respectively.

Lawsuits against investment managers are an offshoot of a broader trend of retirement-plan sponsors being sued, often large corporations targeted for excessive administrative and investment fees in their 401(k) plans. Other offshoots include universities being sued for management of their 403(b) plans.

The Invesco lawsuit, Diego Cervantes v. Invesco Holding Company (US), Inc. et al, was filed May 24. It was first reported by Law360.


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