US district judge for New Jersey Peter Sheridan ruled last week that investors did not prove that Axa Equitable Funds Management Group and Axa Equitable Life Insurance, wholly-owned US subsidiaries of the insurer, had breached their fiduciary duties by keeping most of the fees, despite being accused of outsourcing “all of the services” to sub-advisers or sub-administrators for a “nominal amount”.
In a 148-page decision, Sheridan said the plaintiffs did not show that the fees were “exorbitant”, the underlying funds performed poorly, or that Axa failed to act conscientiously, ruling that the Paris-based insurance giant still carried out “significant” duties.
Investors’ contributions to the annuities were allocated to 12 mutual funds, including from Allianz’s Pimco unit and T. Rowe Price, said the judge.
In a statement, Axa said the ruling has vindicated its “manager-of-managers” structure whereby its Axa Equitable Funds Management unit provides essential services to the funds and hires third parties to provide “limited” services.
Dave Hattem, senior executive director and general counsel of Axa Equitable, said: “While it is quite unusual for cases of this type and magnitude to be tried in court to decision, Axa US strongly believed that the lawsuits were without merit and that we provide quality services to our clients.”
He added that Axa is pleased that Sheridan found the fees “fair and reasonable”.
The case is the first of such lawsuit to go to court since 2009 and comes amid a growing backlash against investing costs in the US, as more people demand transparency and the ability to directly monitor their own investments.
Lawsuits have been filed against several major US universities such as Columbia, Duke, the Massachusetts Institute of Technology and Yale as well as against many companies which are accused of charging excessive fees on their employees’ retirement savings.
