Understanding Investment Options

Retirement Plans like Ohio DC offer several types of investment options. Mutual funds are the most common type and are the most familiar to participants. Many large institutional investors like Ohio DC, which has over 200,000 participant accounts, can also offer professionally managed investment options called collective investment trusts (CITs) and separate accounts. These options are similar to mutual funds and are attractive because of their ability to lower costs to participants.

These types of investment options can be recognized by brand name (example: T. Rowe Price Large Cap Growth Fund) or as a “white label” option based on the investment strategy or objective (example: Ohio DC Large Cap Growth Fund). The purpose of a “white label” investment option is to focus on the investment strategy or objective rather than the brand name. These investments are still professionally managed just like their mutual fund counterparts. The use of white label funds has increased in recent years, but the approach is not new. For example, the Ohio DC Stable Value Option, which is the most popular option for our participants has been a white label option since January, 1994.

If you are interested in learning more about the Ohio DC investment options, please review the following definitions and charts.

Definitions

Mutual Fund – A mutual fund is an investment vehicle made up of a pool of money collected from many investors for the purpose of investing in securities such as stocks, bonds, money market instruments and similar assets. Mutual funds are professionally managed, and include costs related to compliance, distribution, and administration required for retail investments.

Collective Investment Trust (CIT) – CITs are similar to mutual funds in that they are professionally managed pools of securities, but they are managed exclusively for qualified retirement plans. CITs have different regulators and regulations, and the difference in regulations has a positive impact on the cost of CITs. CITs have lower distribution, advertising, and customer service costs than similar mutual funds, and the cost savings is passed on to participants.

Separate Account – A separate account is a privately managed investment account opened through a brokerage or financial advisor. Like mutual funds, separate accounts use pooled money to buy stocks, bonds, money market instruments and similar assets. Separate accounts also have different regulators and regulations, and the difference in regulations has a positive impact on the cost of separate accounts. Separate accounts have lower distribution, advertising, and customer service costs than similar mutual funds, and the cost savings is passed on to participants.

White Label – White label funds are generically named funds that are branded by their asset class or objective and usually have no reference to a fund company in their name. White label funds can be composed of professionally managed mutual funds, CITs, or separate accounts.

Types of Investment Options

Type Brand Name White Label
Mutual Fund Templeton Foreign
Vanguard International Growth
Vanguard Total International Stock Index
Vanguard Small-Cap Index
Vanguard Capital Opportunity
Dodge Cox Stock
Vanguard Institutional Index
Vanguard Total Bond Market Index
 
Collective Investment Trust Fidelity Contrafund Commingled Pool
Fidelity Growth Company Commingled Pool
LifePath Portfolios
Ohio DC Intermediate Bond
Separate Account   Ohio DC Small-Cap Growth
Ohio DC Small-Cap Value
Ohio DC Large-Cap Growth
Ohio DC Stable Value Option

Investment Option Comparison

Mutual Funds Collective Investment Trusts Separate Accounts
Professionally Managed
Independent Managers
Ticker Symbol    
Fund Profile
Benchmark
Federal Oversight

Securities and Exchange Commission



Office of Comptroller of the Currency, Department of Labor, IRS



Securities and Exchange Commission, Department of Labor, IRS

Investment Consultant Oversight
Available to Individual Investors    
Available to Retirement Plans

Consider the investment objectives, risks, charges, and expenses carefully before investing by consulting your prospectuses, which contain this and other information. Prospectuses are available by calling 877-644-6457 or visiting Ohio457.org. Read the prospectus carefully before investing.

Each LifePath Portfolio is based on a target year (when you expect to begin using your money). Portfolios are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. LifePath Portfolios are designed for people who plan to begin withdrawing funds during or near a specific year. Like other funds, LifePath Portfolios are subject to market risk and loss. Loss of principal can occur at any time, including before, at, or after the target year. There is no guarantee that LifePath Portfolios will provide enough income for retirement.

International Stock Funds—International funds involve risks not associated with investing solely in the United States, such as currency fluctuation, differences in accounting standards, and the limited availability of information. Over the long term, an investor should be willing to accept a high level of risk resulting from potentially higher market volatility.

Small-Cap Stock Funds—Small-cap funds contain stocks from companies with less than $2 billion in capitalization, including many start-up companies. Small companies can grow much faster than big companies, but small company stocks tend to be more volatile than the stocks of larger companies. Over the long term, an investor should be willing to accept a high level of risk resulting from potentially higher market volatility.

Mid-Cap Stock Funds—Mid-cap funds contain stocks from companies with market values between $2 billion and $10 billion, and often include companies that are well established and growing. Over the long term, an investor should be willing to accept a moderate to high level of risk resulting from potentially higher market volatility. Large-Cap Stock Funds—Large-cap funds contain stocks from companies with market values of more than $10 billion, and they include blue-chip and Fortune 500 companies. They are typically more mature, diversified companies with many products and services. Over the long term, an investor should be willing to accept a moderate to high level of risk resulting from potentially higher market volatility.

Bond Funds—Bonds are loans or debt instruments issued by governments or corporations that need to raise money. Bond funds have the same interest rate, inflation, and credit risks associated with the underlying bonds owned by the fund. Bonds are generally a more conservative form of investment than stocks, and usually provide a more steady flow of income. Typically, bonds have a lower long-term total return than stocks.

Stable Value—These options own short to intermediate term, high-quality securities. Investors who seek safety of principal as well as a competitive rate of return compared to money market funds may invest in these options. The Ohio DC Stable Value Option returns are shown net of fees for investment management, custody, and principal protection. A fund profile can be obtained for the Ohio DC Stable Value Option by calling 877-644-6457 or at Ohio457.org.

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