Recommendations will strengthen the proposed safe harbor, reduce litigation risk, and expand retirement investment options.
Washington, D.C. — MFA recommended targeted changes to strengthen the Department of Labor’s (DOL) proposal to expand access to alternative assets in 401(k) retirement plans in a comment letter submitted today. MFA strongly supports the proposal, which would reduce litigation risk for plan fiduciaries who offer investment options that include alternative assets.
Alternative assets — including private credit, hedge funds, and other non-traditional strategies — can improve diversification and deliver stronger risk-adjusted returns for retirement savers. However, plan fiduciaries have been discouraged from offering these investment strategies to their employees due to legal uncertainty. The DOL proposal would give millions of American workers greater choice in how they invest for retirement by providing a legal safe harbor for plan fiduciaries to offer a greater variety of investment options.
“American workers deserve access to the same types of investment strategies that pensions and other institutional investors have benefited from for decades,” said Bryan Corbett, MFA President and CEO. “Research shows diversified portfolios that include alternative assets can improve long-term returns and reduce risk. The Department of Labor’s proposal will give plan fiduciaries more confidence to offer these investment options while maintaining strong protections for workers and retirees.”
MFA recommended several targeted changes to strengthen the proposal, including:
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Improving the safe harbor. Clarify that fiduciaries who complete the required evaluation steps are deemed to have satisfied the safe harbor, reducing uncertainty and unnecessary litigation risk.
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Improving the examples. Clarify that the rule’s examples are illustrative guides, not the only acceptable way to comply with the safe harbor.
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Clarifying the role of independent fiduciaries. DOL should make clear that engaging an independent fiduciary is a choice, not a requirement in any specific context. Including the term in examples outlined in the proposal could lead sponsors to conclude that hiring an independent fiduciary is required in specific situations.
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Focusing on existing protective regimes. Recognize that products governed by the Investment Company Act and the Employee Retirement Income Securities Act (ERISA) are already subject to comprehensive regulatory and fiduciary regimes that address valuation, liquidity, and complexity. Additional analytical requirements would be duplicative and unnecessary.
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Improving the liquidity analysis. The proposal should clarify that fiduciaries may assess whether a product’s liquidity profile aligns with how similar products are designed and used in the market. For example, target date funds can include less-liquid assets but still maintain sufficient liquidity overall to meet normal redemption needs. This clarification would help prevent overly restrictive liquidity interpretations that discourage the inclusion of investments that can improve risk-adjusted returns.
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Improving benchmark comparisons. Clarify that fiduciaries may use benchmarks and methodologies commonly accepted by industry professionals when evaluating investment products.
Read the full letter here.
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About the global alternative asset management industry
The global alternative asset management industry — including hedge funds, private credit funds, and hybrid funds — serves thousands of public and private pension funds, charitable endowments, foundations, and other global institutional investors. The industry provides portfolio diversification and risk-adjusted returns to help meet their funding obligations and return targets throughout the economic cycle.
About MFA
Managed Funds Association (MFA), based in Washington, D.C., New York City, Brussels, and London, represents the global alternative asset management industry. MFA’s mission is to advance the ability of alternative asset managers to raise capital, invest it, and generate returns for their beneficiaries. MFA advocates on behalf of its membership and convenes stakeholders to address global regulatory, operational, and business issues. MFA has more than 180 fund manager members, including traditional hedge funds, private credit funds, and hybrid funds, that employ a diverse set of investment strategies. Member firms help pension plans, university endowments, charitable foundations, and other institutional investors diversify their investments, manage risk, and generate attractive returns throughout the economic cycle.
