Comment on DOL Private Equity Information Letter
Wednesday, June 3, 2020
Posted by: Karen Witham
On Wednesday, June 3, 2020, the US Department of Labor (DOL) issued an Information Letter to DCIIA member Groom Law Group on clarifying defined contribution (DC) plan fiduciaries' ability to prudently use private equity within a DC plan, and specifically as part of a diversified investment option in the plan.
Since our founding a little over ten years ago, DCIIA has sought to facilitate an informed discussion around the topic of alternatives in DC plans (see DCIIA's white papers: Is It Time to Diversify DC Risk with Alternative Investments?, May 2013, and Capturing The Benefits of Illiquidity, September 2015).
Just last month, DCIIA's Retirement Research Center published the second iteration of its Custom Target Date Fund Survey, the definitive benchmarking report on current practices, including around the use of alternatives, in cTDFs. Data in the report’s “Diversifiers” section shows a prevalence of 1% for private equity as a cTDF asset class. So, we're clearly still in the “early innings” of an informed dialogue around this topic.
DCIIA is committed to continuing to play a constructive role in facilitating an industrywide conversation on where we go from here regarding the use of alternatives in DC plans. To that end, we will continue to engage with our members, plan sponsors, and other industry organizations on this topic as well as supporting related research through the DCIIA Retirement Research Center.