The Labor Department has given 401(k) plans permission to include private equity strategies within diversified investment options such as target date, target risk or balanced funds.
In an information letter to a law firm representing clients who provide private equity strategies to retirement plans, Labor Department attorney Louis J. Campagna wrote that a plan fiduciary "may offer an asset allocation fund with a private equity component … in a manner consistent with the requirements of Title I" of the Employee Retirement Income Security Act.
"This 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," said the acting assistant secretary of labor for the Employee Benefits Security Administration, Jeanne Klinefelter Wilson, in a statement.
SEC Chairman Jay Clayton, in the same statement, said the Labor Department's decision would provide long-term retirement 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."
