The US Department of Labor issued a proposal of new rules on Monday laying out how retirement plans can add alternative assets ranging from private equity to cryptocurrencies to 401(k) accounts. This move aims to remove long-standing barriers to incorporating these less liquid and less transparent assets into American retirement plans. This follows a decree from President Donald Trump last summer and could open up a new and potentially lucrative source of capital for alternative asset management companies.
Industry groups argue that investments in private markets can improve long-term returns and diversification for savers, while skeptics warn that higher fees, complexity, and limited liquidity could pose risks for retail investors.
The guidelines detail how fiduciaries, who have a fiduciary obligation to act in the best interest of retirement plan participants under the Employee Retirement Income Security Act (ERISA), can incorporate these assets into retirement plans.
Fiduciaries must “objectively, thoroughly, and analytically evaluate and make decisions regarding factors such as performance, fees, liquidity, valuation, performance benchmarks, and complexity,” stated the Department of Labor.
Fiduciaries who adhere to these rules will receive “safe harbor” status, protecting them from legal action.
Treasury Secretary Scott Bessent described the proposed rule as “an initial step in implementing the presidential decree in a safe and smart manner, expanding access to additional retirement plan options for millions of Americans while keeping in mind the importance of protecting retirement assets.”
“The ability of Americans to participate more fully in innovation and economic growth through well-diversified long-term investments is a vital priority for effective retirement planning,” stated Paul Atkins, president of the US Securities and Exchange Commission.
This decision could be a boon for major alternative asset managers such as Blackstone, KKR, and Apollo Global Management, as the new rules could open up a vast pool of retirement savings for them.
In recent months, these firms have faced a wave of withdrawals from their non-traded private credit funds amid investor concerns about the approximately $2 trillion sector.
In September, the Managed Fund Association, an international professional association representing the hedge fund and private credit sector, supported the initiative to allow savers to target higher returns and diversify through alternative assets, while noting that safeguards need to be put in place.
“We look forward to continuing to work with the DOL on a final rule that supports innovation and maintains the strong investor protections that Americans currently benefit from,” said a spokesperson for the Investment Company Institute, a professional group.
