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I have a 401(k) with a gigantic, global, US-based company. The funds available to me include a variety of non-tickered funds — meaning that there's no symbol I can independently research — such as you'd find with the Vanguard or Fidelity funds I'm more familiar with and are mostly branded as State Street.

I've noticed that I'm not receiving any reinvested dividends on any of the 4 funds I'm invested in which include an S&P 500, S&P 400 Mid-cap, Russell 2000 and International.

In one example, the S&P 500 has been owned by me for several years and has an expense ratio less than 0.1% and nearly identically tracks the S&P 500. A comparison of the funds purchased over time (according to my records) with the number of shares owned (according to the provider) are the same — suggesting that no dividends are being returned.

Since the top holdings include mostly dividend-paying stocks (Apple, GE, J&J, etc) — what could be happening to those dividends? With a company of this size, I find it hard to believe it could be a clerical error. Is there a scenario where a provider could be 'eating' the dividends and not returning them to the owners?

The plan documents include wording similar to

the value of the index includes reinvestment of dividends

and similar indices have dividends in the 2% range. I'm really interested in ideas for where these returns may have gone.

Edit

I have reached out to the provider requesting what I've sought out here. I'm hoping M.SE will be faster/more accurate.

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1 Answers1

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Your investment is probably in a Collective Investment Trust. These are not mutual funds, and are not publicly traded. I.e. they are private to plan participants in your company.

Because of this, they are not required* to distribute dividends like mutual funds. Instead, they will reinvest dividends automatically, increasing the value of the fund, rather than number of shares, as with dividend reinvestment.

Sine you mention the S&P 500 fund you have tracks closely to the S&P Index, keep in mind there's two indexes you could be looking at:

  • S&P 500 Index. Doesn't include dividends, and is the one most often reported in the news. Currently around 2500.
  • S&P 500 Index Total Return. Assumes dividend reinvestment. Currently around 4850.

Without any new contributions, your fund should closely track the Total Return version for periods 3 months or longer, minus the expense ratio. If you are adding contributions to the fund, you can't just look at the start and end balances. The comparison is trickier and you'll need to use the Internal Rate of Return (look into the XIRR function in Excel/Google Sheets).

*MFs are not strictly required to pay dividends, but are strongly tax-incentivized to do so, and essentially all do.

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