Add State Farm to the (long and growing) list of excessive fee lawsuits. Plaintiffs Amy Ingenhutt and Teresa Odell charge that State Farm includes excessive management fees in the target-date funds the company offers known as the LifePath Funds.
Try to follow this: Suing on behalf of what are only referred to as “investors,” the plaintiffs charge that State Farm, as investment advisor, has violated Section 36(b) of the Investment Company Act of 1940. The LifePath Funds, issued by the State Farm Mutual Fund Trust, do not invest directly in securities. Instead, each LifePath Fund invests in a corresponding separate portfolio called a “Master Portfolio.” The Master Portfolios, in turn, are part of a fund known as the Master Investment Portfolio. SFIMC does not manage the Master Investment Portfolio or the Master Portfolios but instead relies on another investment management company, BlackRock Fund Advisors, to do so.
So it appears the complaint is that the funds are sub-advised.
The lawsuit was filed in the U.S. District Court for the Central District of Illinois against State Farm Investment Management Corporation. The LifePath Funds are target date retirement funds typically sold through State Farm Individual Retirement Accounts (IRAs) and include the State Farm LifePath Retirement Fund, the State Farm LifePath 2020 Fund, the State Farm LifePath 2030 Fund, the State Farm LifePath 2040 Fund, and the State Farm LifePath 2050 Fund.
“State Farm Investment Management Corporation ‘does not provide any day-to-day investment services to the LifePath Funds,’” the suit reads. “Nor does it provide any investment guidance or policy direction in connection with daily portfolio management. Nonetheless, it receives approximately half of the net management fees collected from the LifePath funds.’”
In 2014, State Farm Investment Management Corporation collected approximately $17.5 million in management fees, according to the complaint
Plaintiffs are represented by Berger & Montague, P.C., Schneider Wallace Cottrell Konecky Wotkyns LLP, and Hudson Mallaney Shindler & Anderson, P.C. The law firms described the LifePath management fees as “a waste of the investors’ money and a breach of [SFIMC’s] fiduciary duty.”
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
