Private Equity Gets Longed-For Bailout In Form of 401(k) Money - Dealbreaker

It’s been a tough, lonely pandemic for the private equity industry. Returns have been bad, exacerbated by an ineptitude in the retail sector which has been embarrassingly exposed. The hyperactive SEC has been on its case, and even if the sanctions stemming therefrom have been modest, it’s quite frankly a nuisance firms could do without. Worst of all, when it turned to its friends in Washington in its hour of need, it got a stunning cold shoulder: No PPP money for those ineptly run businesses previously so profitably leveraged by their p.e. owners, no matter how much their banking buddies would like to provide it.

But this administration was not likely to let a group of credit artists like minded to President Trump and his Cabinet cronies twist in the wind forever. So in place of PPP or a similarly direct bailout of the reviled industry, it would like to offer this potentially even more profitable indirect assistance, opening America’s 401(k) plans to the kind of heavy losses currently enjoyed only by the very rich, and opening a rich vein of potential fee income to the industry delivering them, one that will dovetail nicely with the expansion of the term “accredited investor” to anyone who completes a relevant BuzzFeed quiz.

The U.S. Labor Department issued guidance Wednesday stipulating that business owners with 401(k) plans can more safely offer certain funds with a private equity component to their employees…. The guidance gives more legal protection to businesses whose 401(k) plans offer TDFs that bundle in private equity….

“This Information Letter will help Americans saving for retirement gain access to alternative investments that often provide strong returns,” U.S. Secretary of Labor Eugene Scalia said, in a statement….

“What you’ve seen in recent years is that private equity looks at how the world is changing and the decline of the defined benefit plan, which has been a major market for their funds,” Roper said.

“They see this huge pot of money — in terms of [401(k)] plans — and they are anxious to get that money,” she added.

Private equity investments may be coming to your 401(k) [CNBC]



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