- Employees at Duke University, Johns Hopkins University, the University of Pennsylvania and Vanderbilt University have joined a class action lawsuit against their institutions, alleging mismanagement and muddled approaches to controlling fees associated with retirement investment funds.
- Institutions will now have to examine the process of selecting record keepers, or fund service managers, to analyze and provide options with lower fees and conservative yields for retirement funding.
- Legal costs associated with the lawsuit may compound an already-tenuous financial situation facing institutions which have taken significant losses in investments over the last few years.
With some of the universities named in the lawsuits holding more than 400 fund options managed by five or more record keepers, universities will have a difficult time wading through details of each fund to determine if and how they could have noticed trends of investment underperformance. But with higher education at large struggling to maintain endowment gains, and being pressured to funnel more of that money to low-income students or to justify development strategy, there is little room for error in management of funds, even in multi-billion dollar funds finance vehicles.
University leaders, particularly at institutions with high endowments and a multitude of investment options for employees, are sure to find themselves on the defendant side of this lawsuit. And when that happens, they must be prepared for the legal and public relations costs of explaining why they made what could have been a simple, transparent process more complex to the detriment of employees.