The US Department of Labor on Monday released a proposal for new highly anticipated rules aimed at clarifying how retirement plans can add alternative assets ranging from private equity to cryptocurrencies to 401(k) accounts.
The measure, which seeks to remove long-standing barriers to incorporating these less liquid and less transparent assets in American retirement plans, follows an executive order by President Donald Trump last summer and could pave the way for alternative asset management companies to tap into a new source of significant and potentially lucrative capital.
Industry groups argue that investments in private markets can enhance long-term returns and diversification for savers, while skeptics warn that higher fees, complexity, and limited liquidity could pose risks for retail investors.
The guidance specifies how fiduciaries, who have a fiduciary duty to act in the best interest of retirement plan participants, in accordance with the Employee Retirement Income Security Act (ERISA), can incorporate these assets into retirement plans.
These fiduciaries will need to “objectively, thoroughly, and analytically evaluate and make decisions about factors such as performance, fees, liquidity, valuation, performance benchmarks, and complexity,” the labor department stated.
Fiduciaries that comply with these rules will be granted “safe harbor” status, protecting them from legal action.
Treasury Secretary Scott Bessent said that the proposed rule was “an initial step in implementing the presidential decree in a secure and intelligent 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 more fully participate in innovation and economic growth through well-diversified long-term investments is a vital priority for effective retirement planning,” said Paul Atkins, president of the US Securities and Exchange Commission.
This decision could be a boon for large 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, they have faced a wave of withdrawals from their non-tradable private credit funds, amidst investor concerns about this 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 aim for higher returns and diversify with alternative assets, while specifying that safeguards should 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,” a spokesperson for the Investment Company Institute, a professional group, said on Monday.
