The Oregonian – What’s inside Intel’s retirement plans? Hedge funds. Lots of ’em.

By Brent Hunsberger – August 30, 2014

I recently looked inside Intel’s workplace retirement fund. My logic board just about locked up.

Intel Corp. is Oregon’s largest private employer and, as a result, carries a big burden. Nearly 18,000 employees in the state rely heavily on the company’s three retirement plans to ensure they will be able to enjoy their twilight years.

Brian Krzanich, chief executive officer of Intel Corp., speaks at the 2014 Consumer Electronics Show (CES) in Las Vegas. (Photo: The Oregonian)

Some of the plans’ features would be the envy of any worker, with a generous employer contribution and a traditional pension that kicks in if an employee doesn’t save enough in his or her 401k.

Unfortunately, Intel’s 401k-type plans are unusual in a couple of ways that aren’t comforting to some investors and financial advisers. It’s embarked, essentially, on an experiment with nearly $14 billion in worker retirement money for more than 63,000 participants. We won’t know the results for years. Thus far, the performance isn’t reassuring.

I’m talking mainly about Intel’s decision in 2007 to begin using expensive, opaque and potentially risky hedge funds in its main 401k investment options. I’m also talking about its practice, in most cases, of forcing company contributions into them.

Bill Parish, an investment adviser in Portland and investor in Intel stock, said he thinks the practices could open the company to lawsuits by employees, especially if the hedge-fund strategy falters.

“You are currently gambling with a big chunk of your employees’ life savings,” Parish warned Intel executives earlier this year in an email, “and paying outrageous fees.” Intel chairman Andy Bryant responded, promising to pass Parish’s concerns to executives overseeing the plans.

Fortunately, Intel has announced a much-needed change. In April, the same month Parish sent his email, Intel’s fund oversight committee decided to allow employees the option of moving company contributions into low-cost index funds. That opportunity will likely start in January, Odell said.

Note: The following story is based upon a blog post I did on January 16, 2014, 8 months prior to this story. In addition to the post, at the same time I directly asked Intel’s top management to change a key component of their retirement plan and make the hedge fund mix optional rather than required. They are making the change effective January, which is the reason the reporter contacted me.

Frankly, it was disappointing to be quoted on the negative aspect of this situation and see my positive observations regarding Intel attributed to the reporter and a mix of other financial advisors. I later learned that Brent is “technically” no longer a reporter with the Oregonian but rather a columnist who now works for an investment advisor.

The good news is that, in a testament to good governance, Intel is making the changes recommended.