The order announces a new policy regarding participants’ access to funds with direct and indirect investments in the following categories of alternative assets:
- Private market investments holding equity, debt or other financial instruments not traded on public exchanges, including funds whose managers take an active role in the management of the issuers of these securities (e.g., private equity funds)
- Actively managed vehicles that invest in digital assets (e.g., cryptocurrencies)
- Real estate
- Commodities
- Infrastructure development projects
- Lifetime income investment strategies, including “longevity risk-sharing pools” (a term the order doesn’t define)
According to the order, participants should have access to funds that invest in alternative assets when the plan fiduciary determines they provide an appropriate opportunity for participants “to enhance the net risk-adjusted returns on their retirement assets.”
The order recognizes that many defined benefit plans already invest in these assets but blames litigation risk and “burdensome” DOL guidance for discouraging DC fiduciaries from offering them. (One set of fiduciaries who began incorporating alternative assets into their DC plan’s investment line-up over a decade ago recently prevailed in a long-running ERISA lawsuit).