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Major Boost Coming to Alts

October 10, 2022

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Alternative Assets Set to Receive a Major Boost Following Amendments to ERISA Act

Changes to the Employee Retirement Income Security Act may result in more investment in alternative assets.

The Retirement Savings Modernization Act would expressly clarify that 401(k) plans can incorporate assets in all asset classes.

Whilst 401(k) investment in alternative assets is not expressly prohibited by law, retirement funds and institutional investors have been cautious to invest in the unique opportunities offered by alts.

Senator Scott stated in a recent press release that defined benefit plan investments beat defined contribution plan investments because they invest in a broader spectrum of assets.

Alternative assets like private equity and real estate, in particular, are highlighted as profitable options for defined contribution plans in the publication.

The statement criticizes the fact that defined contribution plan trustees are frequently too careful to invest in alternative assets while administering defined contribution plans for fear of being subjected to ERISA-related lawsuits for investing recklessly.

The legislators reference a Georgetown University research that indicates that more diverse plans might boost retirement plan value by 17% throughout the plan’s life and prevent losses in a downturn.

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