Congress Eyes Boosting Alts for 401(k)s

Backed by members of both parties, the measure aims to allow greater range of investments in defined contribution plans.



A bipartisan congressional group has proposed an amendment to the Employee Retirement Income Security Act bill that would clarify that fiduciaries managing defined contribution plans are permitted to invest across all asset classes, without being limited to stocks and bonds.

Sens. Pat Toomey, R-PA, and Tim Scott, R-SC, along with Rep. Peter Meijer, D-CO, proposed the “Retirement Savings Modernization Act” last week. In a press release issued by Sen. Scott, the legislators explained that defined benefit plan investments tend to outperform defined contribution plans, because they invest in a wider range of assets. The release emphasizes private equity and real estate in particular as lucrative investments for defined contribution plans.

The release laments that defined contribution plan fiduciaries are often too cautious to invest in alternative assets when managing defined contribution plans for fear of being subject to ERISA-related litigation for investing imprudently. The legislators cite a study released by Georgetown University that estimates that more diversified plans could increase retirement plan value by 17% over the life of the plan and reduce losses in a downturn.

As it stands now, ERISA does not ban investment in alternative asset classes, and so this amendment would not actually the change the law. Instead, the bill is intended to clarify the law for fiduciaries who may be unaware that they can invest in alternative asset classes, or fear being sued solely on that basis. The bill emphasizes that alternative asset classes are not exempt from ERISA’s fiduciary duties of loyalty and prudence, and these asset classes if chosen still have to be chosen through a prudent process.

This legislation is likely informed by growing research that shows that 401(k) plans might benefit from investing in alternative assets, but are cautious of doing so out of fear of ERISA litigation for imprudence.

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The bill specifically names the following asset classes: commodities, public and private debt, digital assets, hedge funds, infrastructure, insured products and annuities, private equity, real assets, real estate or real estate related securities, and venture capital.

A number of industry groups, including the Small Business Investor Alliance, Voya Financial, and the American Securities Association, have offered their support for the bill.

Charlie Nelson, the vice chairman and chief growth officer at Voya Financial says that the bill “could help a lot of Americans reach their long term retirement goals.” Though the bill does not technically change existing law, it provides useful clarification and “gives comfort to plan sponsors around this topic” and should encourage increased investment in alternative assets in defined contribution plans. Nelson emphasizes that there is a lot of opportunity in alternative assets for defined contribution plans looking to diversify.

Though the legislators emphasize private equity and real estate in their statements regarding the bill, the crypto currency community may stand to gain the most from it. Bitcoin News celebrated the bill and noted that it would apply to crypto and likely encourage investment in it.

Although the bill does not name cryptocurrencies explicitly, it does name “digital assets.” Earlier this year, Fidelity unveiled an investment product called the Digital Assets Account, which allows participants to invest in a fund that contains up to 20% bitcoin. This brought criticism from Democratic Sens. Elizabeth Warren, Dick Durbin and Tina Smith. They stated in an open letter addressed to Abigail Johnson, the CEO of Fidelity, that Bitcoin is a “volatile, illiquid, and speculative asset” and described the decision to include them in a 401(k) plan as “ill-advised.”

The Department of Labor also cautioned against investment in crypto in 401(k) plans in March. The department warned that fiduciaries should “exercise extreme care before they consider adding a cryptocurrency option to a 401(k) plan’s investment menu for plan participants.” The Department said that cryptocurrencies are unusually “speculative and volatile” and are more vulnerable to hacking.

Secretary of Labor Marty Walsh also stated that he would be open to more regulation on cryptocurrencies generally, and in retirement plans in particular, in a hearing before the House Education and Labor Committee in June.

In August, the SEC proposed amendment to Form PF, a confidential reporting form required of some investment advisers to help the SEC assess systemic risk in the economy. The amendment clarifies the definition of digital assets as those that are “issued and/or transferred using distributed ledger or blockchain technology” and requires advisers to disclose the value of a fund’s assets held as digital assets.

Voya’s Nelson explains that there is not significant interest in crypto among plan sponsors today and digital assets are “not an area of high demand for retirement plan consultants.”

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Brandeis Seeks New CIO, Amherst Looks to Add to ‘Mighty’ Investment Team

Replacement sought for former Brandeis CIO Nick Warren, who left in March to join Glenmede Trust.



Brandeis University and Amherst College are looking to bolster their investment teams, as Brandeis is seeking a new chief investment officer, while Amherst is looking to add an investment officer to its “small but mighty” team.

Brandeis is looking to hire a CIO to oversee its $1.2 billion endowment and succeed Nicholas Warren, who left the endowment in March after more than a decade to become CIO of Glenmede Trust Co. Tarek Saghir is currently Brandeis’ interim CIO.

According to a job posting on the university’s website, the CIO reports administratively to the university’s executive vice president of finance and administration and works very closely with the investment committee chair.

“The chief investment officer will be a proven investor and strategic player/coach with excellent judgment who can combine top-down thematic thinking with high quality bottoms-up manager selection and manager oversight,” the posting says.

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The CIO is responsible and accountable for the overall management of the investment portfolio and leadership of the investment office staff. They are also responsible for the overall management of Brandeis’ investment portfolio, investment committee relations, and investment office personnel. Additional responsibilities include, but are not limited to:

  • Guiding all aspects of the university’s investment objectives, policies, and processes.
  • Sourcing, evaluating, and executing all investment strategies, including selection and monitoring of external investment managers, as well as oversight of all investment activities.
  • Monitoring performance, portfolio positions, current events, and organizational changes of the invested fund managers and regularly completing analytical reviews evaluating the relative performance of each manager.
  • Leading, supporting, and mentoring Brandeis University’s investment office staff.

The posting also said prospective candidates should have at least 12 years of  experience as a senior investor with an institutional asset management platform, including, but not limited to, an endowment, foundation, family office, or outsourced CIO. The university has hired David Barrett Partners to help in its search.

Meanwhile, Amherst College CIO Letitia Johnson is looking to add an investment officer to her team, which oversees the endowment’s nearly $3.8 billion investment portfolio.

“The Amherst College Endowment is looking for an investment officer to add to our small but mighty investment team!” Johnson said in a LinkedIn post.

According to a posting for the job, the investment officer will report to Johnson and is expected to collaborate with the team as well as mentor analysts and summer interns. 

“The portfolio is concentrated and has low turnover,” says the posting. “As such, successful candidates will demonstrate a strong interest in spending time on the current portfolio and will exhibit a long-term mindset.”

Responsibilities for the job include, but are not limited to:

  • Sourcing, conducting due diligence, selecting, and monitoring existing and prospective investment managers in a variety of asset classes.
  • Helping prepare materials for the investment committee and other high-level audiences.
  • Taking appropriate actions to support a diverse workforce and committing to diversity, equity, and inclusion.

Prospective candidates are expected to have a minimum of five to 10 years of related investment experience, and are required to have a bachelor’s degree, while MBA, CFA and/or CAIA designations are preferred.

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