Payden/Kravitz Cash Balance Plan Fund Helps Participants Maintain Yearly Contributions

LOS ANGELES, Aug. 17, 2011 /PRNewswire/ -- With 401(k) plans capping participants at $22,000 in annual contributions, supplemented by profit sharing plans' contributions of another $32,500, highly compensated individuals have faced a financial challenge: low annual contribution amounts and, therefore, relatively small tax deferrals. Enter Cash Balance Plans, which allow about $220,000 in additional contributions annually.

Although Cash Balance Plans have been in existence since the 1980s, it wasn't until the Pension Protection Act of 2006, which allowed for substantial increases in contributions and tax savings, that the Cash Balance Plan growth exploded. Today, there are about 6,500 Cash Balance Plans, with about 45% in physicians and dentists offices, as well as in legal services firms.

Accustomed to maximizing returns with appropriate risk tolerance, certain investment advisors were caught off guard when they did not adhere to the Cash Balance Plans' strict return rate. On January 1st each year, every Cash Balance Plan adopts a "fair market rate of return," oftentimes, the 30-year Treasury bond yield averaged daily for the month of December. Known as the interest crediting rate (ICR), this earnings amount is credited to each participant in the Plan. If the Plan's rate of return exceeds the ICR, then future employer contributions are reduced, which reduces the tax savings. When the rate is less than the expected return, the employer funds the shortfall.

With no fund mimicking the 30-year Treasury bond return, investment manager Payden & Rygel and Kravitz, Inc., which designs, administers and manages corporate retirement plans, teamed up in September 2008 to form the Payden/Kravitz Cash Balance Plan Fund, the first and only fund dedicated solely to Cash Balance Plans. "Our challenge is that we have one calendar year to try and earn a return that hits the ICR exactly on the nose," says David Hilton, VP of Payden & Rygel. "Then on January 1st we obtain the new rate and start all over again."

Like walking a tightrope, the fund return has to perfectly align with the ICR, which keeps the portfolio managers busy as they allocate the funds, monitor risk in the portfolio and try to match the portfolio return to the ICR, net fees.

In 2010, the Payden/Kravitz Cash Balance Plan Fund (PKBIX) outperformed the ICR by 13 basis points, in line with its overall objective of not only hitting the targeted Interest Crediting Rate net of Fund expenses, but also achieving additional return, when possible, to account for administration costs of running these types of plans. (As of June 30, 2011 the fund returned 4.68% for the previous 12 months vs. the benchmark return of 4.45%. Since inception through June 30, 2011 the fund returned 4.09% vs. the benchmark return of 3.90%. Total Fund Operating Expenses are 1.98%.  However the Adviser has contractually agreed to limit Total Annual Fund Operating Expenses After Fee Waiver or Expense Reimbursement [excluding interest and taxes] to 1.25%. This agreement has a one-year term, renewable annually on February 28th.)

Next: Payden/Kravitz challenge of hitting a target in only one year.

About Kravitz:

Since 1977, Kravitz has designed and administered innovative corporate retirement plans. Today the company administers more than 1,200 plans with $4.5 billion in assets. Kravitz designed its first Cash Balance Plan in 1989. In addition to designing innovative corporate retirement plans, Kravitz has created the first and only "Cash Balance Coach" training program which teaches advisors and TPAs how to sell cash balance plans. To learn more about Kravitz or the Cash Balance Coach program please visit www.CashBalanceDesign.com.

About Payden & Rygel

Founded in Los Angeles in 1983, Payden & Rygel manages more than $60 billion in assets from offices in Los Angeles, Boston, and London.  Payden & Rygel's independent investment management status eliminates the potential for conflicts. Their approach to investment management focuses first and foremost on managing risk. Their client list includes an impressive array of corporations, foundations, public funds and union plans. To learn more about Payden & Rygel please visit www.payden.com.

Press Contact:
Angela Dailey
714-322-7202
www.daipartnerspr.com

Kravitz Contact:
Dan Kravitz
818-379-6162

Payden & Rygel Contact:
David Hilton
213-830-4278

For more information and to obtain a prospectus, visit payden.com or call 213-830-4278. Before investing, investors should carefully read and consider investment objectives, risks, charges, expenses and other important information about the Fund, which is contained in this document. Quoted performance data represent past performance, which does not guarantee future results. Investment returns and principal value will fluctuate, so investors' shares when sold, may be worth more or less than their original cost. For the most recent month-end performance, which may be lower or higher than that quoted, visit payden.com or call the phone number listed above.

SOURCE Payden & Rygel

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