The City of Pasadena’s Deferred Compensation Trust Administration Committee is scheduled to meet Aug. 4 to review the second-quarter performance of the city’s 457 deferred compensation plan and to consider replacing two funds that have trailed their benchmarks, according to the June 30 performance report prepared by the Fiduciary Consulting Group.

The plan held about $472.8 million in assets as of June 30 and serves as a primary retirement savings vehicle for Pasadena city employees. The committee, an independent fiduciary body that oversees the plan’s investment lineup, is expected to act on recommendations that would remove two longtime watch-list funds and adjust the options available to participants. The largest single share of plan assets, roughly 36 percent, sits in target-date asset-allocation funds, followed by about 24 percent in large-cap and 20 percent in fixed income.

The consultant recommends replacing the MFS Value fund, which holds about $15.5 million, by mapping those assets to a Putnam Large Cap Value strategy. It also recommends replacing the Invesco Global fund, now holding a negligible balance of about $5 following an earlier asset transfer, by mapping it to the plan’s existing American Funds EUPAC option. Both funds have remained on the plan’s watch list for quantitative underperformance, MFS Value since the fourth quarter of 2024 and Invesco Global since the third quarter of 2022.

Three other funds would stay under watch. The report recommends retaining watch status for the MFS Growth fund, at about $44.4 million, and the Vanguard International Value fund, at about $4.4 million, each cited for trailing its benchmark and peer group over a five-year period. It also recommends keeping the MFS Mid Cap Growth fund, at about $7.1 million, on watch, though the report notes that the fund’s performance was back in compliance as of the first quarter. The committee is also scheduled to discuss watch options for the Allspring Special Mid Cap Value fund, at about $5.2 million.

Participants in the plan’s stable value option would also see a name change. According to the report, Franklin Templeton has announced that, effective July 15, the plan’s Putnam Stable Value Fund will be renamed the Franklin Stable Value Fund.

Separately, the committee is scheduled to evaluate whether to delegate discretionary investment management of the plan’s target-date fund series, currently built on Vanguard Target Retirement Trust options, to the Fiduciary Consulting Group. Under that arrangement, the consultant would make fund decisions for the target-date series rather than only recommend them. The report says the change could let the plan use institutional pricing to lower costs for participants and would carry no additional fee for the consultant to serve in that role, while shifting investment-selection liability for those funds away from the committee. The consultant notes the delegation would be limited to the target-date series, would still require ongoing committee oversight and would require an amendment to the consulting contract.

The report frames the recommendations against a strong second quarter for markets. U.S. equities rallied as tension in the Middle East eased, with the S&P 500 index returning 15.2 percent and the small-cap Russell 2000 index gaining 21.5 percent for the quarter, led by technology and industrial shares amid renewed optimism over artificial intelligence.

The Deferred Compensation Trust Administration Committee is scheduled to meet at noon on Tuesday, Aug. 4, in Pasadena. For more information call (626) 744-7311 or visit https://www.cityofpasadena.net/commissions/agendas/.

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