The fund management arm of US insurer State Farm is facing a lawsuit over investment fees related to its target-date funds (TDFs).
In the complaint, filed July 22 at the Illinois Central District Court, investors alleged that State Farm Investment Management Corporation was charging “excessive management fees” for its LifePath range of TDFs.
“Even though State Farm undertakes little or no management on behalf of the LifePath Funds, it takes for itself nearly half of the investment management fees that investors pay.” —Berger MontagueThe lawsuit cited Section 36(b) of the Investment Company Act of 1940, which relates to a fund manager’s fiduciary duty with regard to fees.
Berger Montague, one of the law firms acting on behalf of investors, said on its website that “even though State Farm undertakes little or no management on behalf of the LifePath Funds, it takes for itself nearly half of the investment management fees that investors pay”. The firm claimed the arrangement “represents a waste of the investors’ money and a breach of [State Farm Investment Management]’s fiduciary duties”.
The LifePath TDFs’ investment portfolios are managed by BlackRock.
A spokesperson for State Farm emphasized that the lawsuit was “only an allegation at this time”, adding: “We rarely find it appropriate to comment on pending litigation and have no plans to comment at this time.”
Related: Fees, Lawsuits, and the Fate of TDFs