Kaiser Permanente pulls plug on mutual fund series with $21 billion

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The trustees of Kaiser Permanente’s KP Funds family have decided to liquidate its target-date mutual fund series and four core mutual funds effective Dec. 15, according to a filing with the Securities and Exchange Commission.

The filing didn’t give a reason. Representatives for Kaiser Permanente didn’t respond to phone call and email requests for comments.

A spokeswoman for Callan LLC, the funds’ investment adviser, declined to comment. The collection of four core funds and the 11-vintage target-date series had aggregate assets of $20.9 billion as of Nov. 12, according to data compiled by Morningstar Direct. The firm doesn’t analyze KP Funds.

Acting on a recommendation by Callan, the fund family’s trustees approved a plan for “liquidation of each fund’s assets and the distribution of the net proceeds pro rata to the fund’s shareholders,” said the SEC document filed Nov. 12.

“The funds are expected to cease operations and liquidate on or about December 15, 2020,” the document said. “The liquidation date may be changed without notice at the discretion of the Trust’s officers.”

The SEC notice said the KP Funds are “offered exclusively to participants in retirement plans specified by Kaiser Foundation Health Plan Inc.”

For investors who don’t sell their fund shares by the liquidation date, “each fund will distribute to each such shareholder, on or promptly after the liquidation date, a liquidating cash distribution equal in value to the shareholder’s interest in the net assets of the fund as of the liquidation date,” the SEC document said.

Most of the target-date series — called KP Retirement Path Funds — was launched in January 2014. A 2065 vintage fund was launched in May 2019.

The series features a conservative retirement income fund and 10 other vintages with increasing equity exposure starting with a 2020 fund and proceeding every five years to a 2065 fund, according to a September 2020 fact sheet from Kaiser Permanente.

The equity allocation to the retirement income fund is 30.8%. The equity allocation is 85% for each of the 2055, 2060 and 2065 funds.

Net expenses for the target-date series range from 33 basis points for the retirement income fund to 61 basis points for the 2065 fund.

The target-date series includes investments in the four core funds: the KP Large Cap Equity Fund, the KP Small Cap Equity Fund, the KP International Equity Fund and the KP Fixed Income Fund. They were launched in 2014. The target-date series also invests in funds from unaffiliated companies.

A Callan document said only the small-cap equity fund is available for direct investment by Kaiser Permanente participants.