06.02.26

US Fund Management Firms Back 401(k) Alternative Assets Proposal

by: Suzanne McGee

U.S. fund managers broadly support a proposed U.S. Labor Department rule that would allow 401(k) retirement plans to invest in alternative assets such as private credit and cryptocurrencies, potentially channeling part of the $14.2 trillion in defined-contribution retirement savings into private markets. The proposal has drawn more than 33,000 public comments, revealing a sharp divide between advocates who argue it could improve diversification and returns, and critics who warn it could expose ordinary savers to higher fees, liquidity risks and complex, hard-to-value investments. Industry groups including the Investment Company Institute favor “modest” allocations within diversified target-date funds, while advisors and trade groups highlight potential benefits from access to private markets. However, investor advocates and some financial professionals caution that retail investors would lack control over asset selection and could face mismatches between liquidity promises and underlying private assets, particularly in market downturns. The Labor Department is now reviewing comments before deciding on a final rule.

Read the full article on Reuters