Elizabeth Warren pushes back on plan to get private equity into 401(k)s

A typical 401(k) plan only offers stock and bond funds that invest in publicly traded companies. But private companies — traditionally the domain of institutional and high-net-worth investors — have become a significant part of the overall investing market. Do they belong as an option in workplace retirement plans, given that they are often more expensive and less transparent than publicly traded securities?

A typical 401(k) plan only offers stock and bond funds that invest in publicly traded companies. But private companies — traditionally the domain of institutional and high-net-worth investors — have become a significant part of the overall investing market. Do they belong as an option in workplace retirement plans, given that they are often more expensive and less transparent than publicly traded securities? It’s a question that’s been getting a lot of attention as the private investment industry and others seek to “democratize” access to such investments. And it’s an issue receiving pushback from some lawmakers and consumer advocates, including Sen. Elizabeth Warren, the top-ranking Democrat on the Senate Banking Committee. Most recently, Warren sent a letter and a series of questions to Empower, one of the largest workplace retirement plan recordkeepers, probing its recently announced decision to offer plan sponsors the choice of including private equity as an investment option for their employees. In its response to Warren earlier this week, Empower — which serves roughly 90,000 corporate, government and nonprofit employers — likened the desire to give people access to private markets to the creation of 401(k)s decades ago. “The 401(k) democratized access to the public markets in unprecedented fashion and without it, many people would have no access to investing,” Empower CEO Ed Murphy wrote. “Today, we are facing a similar moment.” Murphy, noting that there are far fewer publicly traded companies today than 30 years ago, cited the growth in capital going towards private companies and the estimated $13 trillion in assets in the global private equity market. “This structural shift means fewer opportunities for everyday investors saving in defined contribution plans — especially those seeking exposure to innovative or fast-growing companies.” He also stressed that the new investment option it would offer would have guardrails. “Private markets investing is not for everyone and Empower is not suggesting that it is. Empower is not advocating for unregulated or unmanaged access to complex asset classes. … It’s a carefully monitored gateway.”