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What They Are Saying: Expanding Access to Private Equity Will Strengthen Retirement Security for Millions of Americans

Recently, the Department of Labor issued guidance allowing private equity investments to be offered to employer-sponsored retirement plans that invest in multiple asset classes. Government officials, academic experts, and economists praised the decision because it will give more hardworking Americans expanded access to private markets, allowing them to diversify their portfolios and benefit from private-equity’s outsized returns. Here is what they are saying about how private equity will strengthen retirement security for millions of Americans:

DEPARTMENT OF LABOR SECRETARY EUGENE SCALIA: “This Information Letter will help Americans saving for retirement gain access to alternative investments that often provide strong returns,” U.S. Secretary of Labor Eugene Scalia said. “The Letter helps level the playing field for ordinary investors and is another step by the Department to ensure that ordinary people investing for retirement have the opportunities they need for a secure retirement.”

SEC CHAIRMAN JAY CLAYTON: DOL letter “will provide our long-term Main Street investors with a choice of professionally managed funds that more closely match the diversified public and private market asset allocation strategies pursued by many well-managed pension funds as well as the benefit of selection and monitoring by ERISA fiduciaries.”

EBSA ACTING ASSISTANT SECRETARY JEANNE WILSON: “This [Information] Letter should assure defined contribution plan fiduciaries that private equity may be part of a prudent investment mix and a way to enhance retirement savings and investment security for American workers.”

PROFESSOR GREGORY BROWN, UNC KENAN-FLAGLER: “My research shows that adding a modest allocation of private investment assets to a diversified portfolio of public assets would have historically both increased returns as well as reduced risk.  The analysis suggests that there are real diversification benefits from adding private equity, venture capital, and private real estate in place of public equity in 401k or other defined contribution saving vehicles.  Over a fairly long period of time the increase in total portfolio annual returns, after fees, from a 20% allocation to private assets ranged from 30bps to about 200bps depending on the types of investments.  These results suggest that allowing retail investors to have access to a diversified private investment vehicle could provide meaningful benefits.”

HAL SCOTT, PRESIDENT OF THE COMMITTEE ON CAPITAL MARKETS AND HARVARD LAW SCHOOL PROFESSOR: “The DOL’s information letter is a major step towards providing U.S. retirees that have over $6 trillion in 401k retirement savings with access to the high returns and diversification benefits of private equity.”

JONATHAN EPSTEIN, PRESIDENT OF THE DEFINED CONTRIBUTION ALTERNATIVES ASSOCIATION: “The DOL is helping plan fiduciaries give participants access to investment products that had previously been limited to institutional investors,”

COMMITTEE ON CAPITAL MARKETS REGULATION: “the DOL’s information letter is a major step towards providing U.S. retirees that have over $6 trillion in 401(k) retirement savings with access to the high returns and diversification benefits of private equity…”I am glad to see that the DOL took this action pursuant to President Trump’s Executive Order to remove barriers to economic growth and innovation,”

COMMITTEE ON INVESTMENT OF EMPLOYEE BENEFIT ASSETS: “The DOL has taken a very helpful step to encourage DC plan fiduciaries to consider alternative investments as part of a prudent, diversified participant portfolio. Our Members, who are stewards of both DC and Defined Benefit plans, have for years been effectively utilizing alternatives in their DB portfolios, and the DOL’s guidance today is a very positive step toward further encouraging prudent fiduciaries to actively consider the merits of alternatives for their DC plans.”

AMERICANS FOR TAX REFORM: “The Trump Administration’s decision to allow Americans to invest in private equity with their 401(k)s is a big win that will give every family saving for retirement more options. Big pension plans already had this option. Now everyone does.”

CITIZENS AGAINST GOVERNMENT WASTE: “Great news for #taxpayers and investors from @USDOL, allowing everyone to invest in private equity companies through retirement accounts, which only public pension funds have been able to do.”

SARAH ANDERSON, DIRECTOR OF POLICY, FREEDOMWORKS: “Glad to join Georgetown today for a discussion of USDOL’s new guidance that allows Americans to invest in 401k plans with private equity. Huge step forward in retirement freedom and savings success!”

NATIONAL TAXPAYERS UNION: “Overall, this move has the potential to offer up great opportunities and great returns for many Americans saving for retirement. At a time of unprecedented upheaval in the stock market, PE investments can represent a promising alternative for millions of investors looking for strong returns at an uncertain time. DOL should be applauded for their efforts.”

TAXPAYERS PROTECTION ALLIANCE: “Fortunately, recent actions by the Department of Labor to expand the scope of permitted 401(k) investments will give workers the flexibility they need to plan for their retirements. By giving savers access to private equity investments, the Trump administration is affording peace of mind to countless employees worried that their hard-earned dollars won’t be enough for retirement.”

HERITAGE ACTION: “The coronavirus pandemic has negatively affected the retirement savings of millions of Americans. With this in mind, we applaud the Trump Administration’s decision to allow Americans to invest their 401(k)s in a wider range of professionally managed portfolios. This move will help many Americans weather the economic turmoil caused by the government’s response to COVID-19, and gives millions of Americans more options when saving for retirement and securing their financial future. Up until now, some pension plans already had the option to contribute to funds that invest in private companies. But now, everyone will have that opportunity. This is the type of reform we need to combat the effects of the coronavirus on America’s economy.”