THE FLOAT

Writing for the CBS News and MoneyWatch, Larry Swedroe shares a few classic findings from a recent study of mutual fund selection and replacement in 401(k) plans. If you're in the business of sponsoring or advising a defined-contribution retirement plan, you should give this a good, hard look... As one would expect, when administrators change offerings, they choose funds that did well in the past. After all, who would choose a fund that had performed poorly? Funds that were added to plans had positive alphas for both one- and three-year periods prior to the change. And, unsurprisingly, managers fire poorly performing funds... Funds that were dropped had negative alphas for both one- and three-year periods before they were dropped. The funds that were added had an alpha above those that were dropped of 2.8 percent per year for three years before the change and 2.3 percent in the year before the change (note the declining alpha). Unfortunately for investors, when a plan deleted a fund..