Demand for do-good investments in 401(k)s rises

Money managers say more participants want to link retirement savings to values.
OCT 27, 2014
Retirement plan participants are seeking more socially responsible investments, according to industry professionals. “We're seeing tremendous interest by participants to have socially responsible investment options available in 401(k) plans,” said Ingrid Dyott, managing director at Neuberger Berman, which manages a $2.4 billion socially responsive fund. About 15% to 20% of 401(k) plans offer investments that provide a social return as well as financial results, she said. Ms. Dyott expects to see that penetration level jump in the next few years as plan sponsors are increasingly questioned by participants about opportunities to link their investments and their values. Without disclosing names, Ms. Dyott said her firm has seen some large Fortune 500 companies recently commit to adding socially responsible investments to their 401(k) plans. Hewlett-Packard reportedly has offered SRI in its retirement plan since 1998. Christine Teske, senior retirement strategy vice president at Calvert Investments, said her firm is seeing increased interest from companies seeking information about investment options for retirement plans and recently added two people to work with advisers doing defined-contribution business. Calvert has focused on SRI for 38 years and has had its investments included in retirement vehicles for 20 years. “We are getting more inquiries from advisers in general, whether they are doing a lot of DC business, or those who have a plan or two,” Ms. Teske said. Part of the reason may be more millennials' entering the workforce and their interest in sustainable investing in general extending to their retirement investments, she said. Much of the interest Calvert sees is for their large company growth investments, though demand has grown for its balanced portfolio, which can be eligible as a qualified default investment alternative, she said. Financial adviser A.J. Sohn, founder of Antaeus Wealth Advisors, said he hears from retirement plan providers that more people are asking for socially responsible options in their 401(k) plan menus. Mr. Sohn hasn't seen that demand firsthand but does expect it's coming. In the last six to nine months, Antaeus has noted a growing interest from individuals seeking to align their value systems and investments. But SRI's popularity seems to come in waves, he said. “People get more interested when times are good and they feel confident,” Mr. Sohn said. “They feel at that point that they can put more constraints on their investments.”

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