Retirement plan provider Empower is responding to U.S. Sen. Elizabeth Warren’s (D-Mass.) concerns about their move to expand access to the private markets for retirement plans, arguing that limiting access to the space “no longer serves the best interests of American workers.”
In a letter this week rebutting Warren’s correspondence last month, Empower CEO Edmund Murphy argued that a 50% decline in publicly listed companies over three decades, coupled with the $13 trillion expansion in the private equity market, signals investors need to be able to benefit from the boom times before it’s too late.
In the letter, Murphy also stressed that private investments would only be included in employees’ defined contribution plans if they meet ERISA standards, and advisors working with companies must be ERISA-compliant.
“Private markets investing is not for everyone, and Empower is not suggesting that it is,” Murphy wrote. “Empower is not advocating for unregulated or unmanaged access to complex asset classes.”
In May, Empower announced a new program to incorporate private market investments in defined contribution retirement plans, such as 401(k)s or IRAs. The investments would pass through collective investment trusts, offering exposure to private equity, credit and real estate.
To do so, Empower partnered with premier private investment fund managers, including Apollo Global Management, Franklin Templeton, PIMCO and Goldman Sachs (among others). Doing so would offer employees access through workplace plans to private investments typically only available to institutional or ultra-high-net-worth investors.
The announcement caught the attention of Warren, who sent a letter to Murphy on June 18 asking him to detail how the firm will ensure the safety of employees’ retirement funds, given what she deemed the private market’s “weak investor protections, its lack of transparency, expensive management fees and unsubstantiated claims of high returns.”
In the letter, Warren argued that private funds’ yield returns typically are on par with public indices “at best,” often generating higher fees of a 2% flat fee or an even larger cut with higher gains (compared to mutual fund fees, which she said were typically below 1%).
“Pensions’ investments in private equity have been dubbed a ‘Wall Street time bomb,’” Warren wrote. “Yet proponents of allowing defined contribution plans access to the private markets often cite the returns seen in pensions as a reason to further expand access to the private markets.”
Warren asked Murphy to detail how Empower decided that alts would be best for clients, how the firm would “maintain high investor protection standards” while allowing private markets access, how the firm plans to handle disclosures and whether the fee structure would change (among other questions).
The Empower response didn’t offer details on fee structures or disclosures. Still, Murphy stressed that private market exposure in the investment vehicles the firm proposed “represents only a small percentage” compared to the larger portfolios and would be designed to mirror the larger strategies available for diversification.
“In short: this is not an open door—it’s a carefully monitored gateway,” Murphy wrote.
Empower’s move (and Warren’s scrutiny) comes as Congress mulls changes to the accredited investor definition, which could expand retail investor access to private markets.
Last month, the House of Representatives passed a bill sponsored by Financial Services Committee Chairman French Hill (R-Ark.) in an overwhelming 397-12 vote. The bill would expand the definition to include individuals with “certain licenses, education or job experience” beyond the codified wealth and income thresholds.
Hill had introduced similar legislation in 2023 and 2024, but told attendees at FINRA’s annual conference earlier this year that there was a “bipartisan consensus” to expand the accredited investor definition, and that more opportunities should be available for non-institutional clients.
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