Empower recently made headlines by announcing a bold new initiative: giving defined contribution (DC) retirement plan participants access to private market investments. On the surface, it sounds like a win\u2014more choice, broader diversification, and the chance to tap into investment strategies once reserved for institutional players.<\/p>\n
But if you\u2019ve been in this business as long as I have, you learn to read between the lines. And what I see here isn\u2019t just a shiny new investment opportunity. It\u2019s a potential red flag.<\/p>\n
What Empower Is Pitching<\/p>\n
Empower has teamed up with some of the biggest names in finance\u2014Apollo, Goldman Sachs, Franklin Templeton, Neuberger Berman, PIMCO, Partners Group, Sagard. Together, they plan to offer private equity, private credit, and private real estate investments via collective investment trusts (CITs). The promise? Limited exposure, reduced fees, and more diversification for your retirement plan lineup.<\/p>\n
Sounds exciting. But let\u2019s pause for a moment.<\/p>\n
The Reality Check<\/p>\n
Private investments aren\u2019t like mutual funds or index funds. They\u2019re complex, opaque, and illiquid. They often require long holding periods. They involve higher fees. And they rely on valuation models that aren\u2019t always easy to verify.<\/p>\n
Using CITs to offer these investments doesn\u2019t magically make them \u201cretirement ready.\u201d It just gives them a new wrapper.<\/p>\n
And let\u2019s be honest\u2014these private market firms aren\u2019t offering access out of charity. They see a new revenue stream in the massive DC plan market. If they can get their slice of that $10+ trillion pie, they will.<\/p>\n
What It Means for Plan Sponsors<\/p>\n
Here\u2019s the part where fiduciaries need to pay attention.<\/p>\n
Just because Empower is offering it doesn\u2019t mean it\u2019s prudent. Under ERISA, plan sponsors have a duty to act in the best interest of plan participants. That means doing serious due diligence:<\/p>\n
\u00b7 Can these investments be properly valued?<\/p>\n
\u00b7 What are the true costs after layering in all the fees?<\/p>\n
\u00b7 Are participants equipped to understand what they\u2019re investing in?<\/p>\n
\u00b7 How will the plan handle liquidity if things go south?<\/p>\n
If the answer to any of these questions is \u201cI\u2019m not sure,\u201d that\u2019s a problem.<\/p>\n
A Word of Caution<\/p>\n
I\u2019m not against innovation. And I\u2019m not saying private investments should be off-limits forever. But throwing them into DC plans without a clear roadmap for transparency, education, and fiduciary oversight is reckless.<\/p>\n
This isn\u2019t just about adding another fund to your plan menu. It\u2019s about fundamentally changing what kind of risk you\u2019re exposing participants to\u2014and what kind of liability you\u2019re taking on as a fiduciary.<\/p>\n
Final Thoughts<\/p>\n
Empower is calling this a \u201clandmark initiative.\u201d I call it a potential minefield.<\/p>\n
If you\u2019re a plan sponsor or advisor, proceed with extreme caution. Ask the hard questions. Demand clear answers. Don\u2019t get swept up in the hype. Because in the retirement plan world, there\u2019s a fine line between opportunity and overreach\u2014and crossing it could cost your participants dearly.<\/p>\n
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