Betterment is the latest organization to oppose a new Labor Department policy that allows retirement plans to offer private equity strategies in their investment mix.
Betterment believes that “intelligent investment for retirement plans should start with access to low-fee vehicles that are easy to understand [and] are highly liquid vehicles for average investors,” says Edward Gottfried, director of Betterment for Business, the firm’s 401(k) plan product. Labor’s “private equity ruling flies in the face of that.”
The department in early June told a law firm representing private equity strategies in retirement plans that a fiduciary could offer a private equity option in a multi-asset target date, target risk or balanced fund structure as part of a “prudent investment mix.”
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The fiduciary, however, “must evaluate the risks and benefits” of such investments, including fees, according to the department’s Information Letter, which lists a number of variables to consider, including fees, valuations and allocation limits.