Private-equity firms notched a major win in Washington with the Trump administration paving the way for the industry to tap a massive pot of money that has long been off limits: the trillions of dollars held in Americans’ retirement accounts.
Q1 2020 hedge fund letters, conferences and more
The Labor Department issued guidance Wednesday effectively allowing 401(k) plans to invest in buyout firms. The agency said the move will bolster investment options for consumers and let them access an asset class that can provide better earnings than stocks and bonds.
In a statement, Labor Secretary Eugene Scalia said the action “will help Americans saving for retirement gain access to alternative investments that often provide strong returns.”
The announcement is a significant deregulatory decision that private-equity lobbyists have sought for years. The move was blasted by consumer groups, which argue that high-fee private equity firms are inappropriate for unsophisticated investors because the industry locks up clients’ money for years and backs businesses seen as far riskier than plain-vanilla bond funds.
Deregulatory Agenda
Better Markets Chief Executive Officer Dennis Kelleher, whose group has fought the Trump administration’s push to dial back rules, accused Labor of inappropriately using the coronavirus crisis to loosen restrictions on 401(k) investments. Labor’s press release noted that President Donald Trump had issued an executive order directing agencies to “remove barriers” that would stand in the way of the economic recovery from the pandemic.
“The last thing the Department of Labor should be doing is enabling or encouraging retiree money to be diverted from transparent public markets with significant disclosure and investor protections to high-risk, dark private markets with little disclosure and few investor protections,” Kelleher said in a statement. “To use the pandemic as a pretext for this irresponsible action is adding insult to injury.”
Read the full article here by by Ben Bain, Advisor Perspectives
