The U.S. Department of Labor on Monday issued long-awaited proposed new rules intended to clarify how trustees can add alternative assets ranging from private equity to cryptocurrencies to 401(k) retirement plans.
The measure, which is intended to ease long-standing barriers to incorporating these less liquid assets in American retirement nest eggs, follows an executive order by President Donald Trump last summer and could clear the way for alternative asset management firms to tap a large and potentially lucrative new source of capital.
Shares of the biggest U.S. private asset managers, such as Carlyle Group (CG.O), Apollo Global Management (APO.N) and Blackstone Inc (BX.N), rose on the news.
COMMENTS:
ALEX CASWELL, FINANCIAL ADVISOR, WEALTH SCRIPT ADVISORS, SAN FRANCISCO:
"The biggest question on my mind as this rule gets considered is liquidity mismatching. Privates tend to be very illiquid. Even in an interval fund form, there can be serious lock-ups. We saw this with real estate and private credit funds recently. So how does this get addressed in an account that may be rolled over, needs to provide for required minimum distributions, or simply used? At some point, for some people, the entire account will need to be distributed. If any part of it is an illiquid asset, what does that mean for investors?"
CHRIS MANKOFF, FINANCIAL PLANNER, LPL, PLANO, TEXAS:
"I view private assets as a different asset class within a diversified portfolio, but it comes with a few strings attached. Most investors don't mind the liquidity restrictions and lock up periods in private assets, but with the recent headlines about private assets that could change views moving forward.
"Access to private equity is very important to investors that are interested in investing in highly profitable and great companies that they can't access through the public markets. I believe having access to private assets in 401(k) plans is great but there should be guardrails for investing such as limiting allocation percentages and thorough due diligence by the plan sponsor in the offerings made available."
