Bloomberg, the financial data titan whose terminals power trading desks worldwide, is now accused of fumbling basic investment oversight in its own retirement plan.
A class action lawsuit filed on January 29 in federal court claims the company and its fiduciary committees kept two actively managed funds in its 401(k) plan for over a decade despite persistent underperformance against their benchmarks—a misstep that may have cost participants up to $197.8 million in retirement savings.
The case, brought by plan participant Rajkumar Rajappan in the U.S. District Court for the Southern District of New York, targets Bloomberg L.P., its Investment Committee, and its Retirement Plan Committee. It centers on two funds: the Harbor Capital Appreciation Fund, added to the plan by 2010, and the Parnassus Core Equity Fund, added by 2015.
Both are actively managed funds—meaning investors pay premium fees for professional stock-picking aimed at beating the market. But according to the lawsuit, that is not what happened.
The Harbor Fund, benchmarked against the Russell 1000 Growth Index, trailed its benchmark by more than 23 percentage points over the ten years ending December 31, 2019, the lawsuit claims. The Parnassus Fund, measured against the S&P 500, allegedly lagged by more than five percentage points from 2015 through December 31, 2019.
The lawsuit claims underperformance only worsened after 2019, with the Harbor Fund allegedly falling over 24 percentage points behind its benchmark and the Parnassus Fund dropping nearly 20 percentage points below the S&P 500.
The lawsuit puts a sharp spotlight on fees. It claims the Harbor Fund charged nearly six times more than the Vanguard Russell 1000 Growth Index Fund—a passively managed alternative that simply tracks the benchmark rather than trying to beat it. Lower-cost index funds from Vanguard and BlackRock, along with actively managed options from Fidelity and JPMorgan, are cited as comparators that allegedly delivered stronger returns.
As of December 31, 2024, plan participants had parked more than $437 million in the Harbor Fund and over $59 million in the Parnassus Fund, according to the lawsuit. Together, the two funds represented about nine percent of the plan's over $5.7 billion in assets.
The lawsuit argues that a prudent fiduciary would have recognized the warning signs and acted—either by swapping the underperformers for better actively managed funds or by switching to cheaper index funds that at least matched the benchmarks. Instead, the funds remained in the plan, and participants allegedly bore the cost.
The case raises two claims under the Employee Retirement Income Security Act: breach of the duty of prudence for allegedly failing to remove imprudent investments, and failure to properly monitor those responsible for overseeing plan assets.
Bloomberg has not yet responded to the lawsuit, and no determination has been made on the merits.
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