OneAmerica long has offered the funds to purchasers of its variable annuities and life insurance, as well as customers of its retirement services division. But assets in the funds have been on a long decline-a trend company officials say is unlikely to be reversed.
The decision reflects the funds' limited reach- they can only be sold within OneAmerica products- in addition to an abundance of competition.
To keep up with financial services rivals, OneAmerica over the years has expanded its fund offerings to about 600, many run by far larger mutual fund operators. OneAmerica says many independent advisers favor those larger operators and steer clients into them.
"The market is narrow, and when we added other funds to the group annuity platform, it essentially crowded out our own funds," John Mason, president of
"So we're OK with that. It's not a critical aspect of our overall business, and that's why we've gone down this path."
The four funds-Value, Socially Responsive, Asset Director, and Investment
Industry observers say the liquidation reflects the reality that the mutual fund industry has changed dramatically-and competition has intensified- since OneAmerica set them up in 1990 to help break into the 401(k) and 403(b) retirement business.
"We're seeing a lot of mutual funds close over the course of the last three or four years," said
OneAmerica said in a regulatory filing that another issue is an increasing amount of litigation against so-called "proprietary funds," which carry the same name as the company offering the products.
"There have been a number of lawsuits in recent years where insurance companies have been sued for imposing proprietary fund requirements on retirement plan customers," the filing said. "For these reasons, the [mutual funds] have steadily lost market share in the last several years."
Mason said that, at their peak in 2007, the mutual funds had
OneAmerica said another challenge was that the "cost and burden of federal regulations impacting the mutual fund industry has also grown substantially."
The rule mandates that advisers making investment recommendations put their clients' best interests before profits.
"Suitability has always been the standard. But now the DOL is raising the bar a little bit and saying, it's not only got to be suitable, it has to be in the best interest" of the client, he said.
OneAmerica officials didn't cite fund performance as a factor, though most have lagged their benchmarks.
Returns in the Asset Director and Value funds trailed the S&P 500 in the one-, five- and 10-year periods that ended
The Socially Responsive fund never performed better than the S&P 500 in any quarter since it debuted in
The expense ratios for the three equityfocused funds ranged from 0.58 percent to 1.20 percent, according to Morningstar, in line with industry averages. The expense ratio for the investment grade bonds fund is 2.33 percent, which experts pegged at the high end of the spectrum.
OneAmerica Asset Management ran the funds for a fee, generating
OneAmerica has about 1,800 employees nationally. Mason said fewer than five were responsible for the mutual funds. Those jobs will be eliminated, though the company is working to reassign the employees to other positions.