Northern Trust sued over ‘poorly performing’ target date funds

What do you want to know

  • Northern Trust failed in its fiduciary duties to carefully select and monitor the plan’s investment options, the suit alleges.
  • For nearly a decade, Northern Trust Focus Funds have underperformed 70% to 90% of peer funds, depending on the suit.
  • The Northern Trust Focus Funds are the default investment options of the scheme.

Northern Trust was hit by an ERISA class action lawsuit on Tuesday for loading its retirement plan with “underperforming” proprietary target date funds that underperformed similar offerings.

The lawsuit, filed in the U.S. District Court for the Northern District of Illinois, was brought by current and former employees of Northern Trust.

He argues that the Chicago-based company failed in its fiduciary duties to carefully select and monitor the plan’s investment options, including automatically enrolling participants in the company’s target date funds, the Northern Trusts. funds.

Northern Trust, the suit says, “failed to regularly monitor the plan’s investments and remove or replace those that became imprudent. Instead, in defiance of their fiduciary duties, the defendants loaded the plan with underperforming proprietary funds. called Northern Trust Focus Target Retirement Trusts…and then kept those funds on the plan’s investment menu throughout the class action period despite their continued underperformance.

Northern Trust said in a statement shared with ThinkAdvisor that it “believes the Northern Focus Funds have been an appropriate vehicle for retirement savings and expects to defend itself against the claims of the lawsuit.”