Empower’s May 14 announcement that the industry’s second-largest recordkeeper will offer private markets investments to retirement plans sent shockwaves through the 401(k) market—and now has triggered a letter asking questions about it from Sen. Elizabeth Warren (D-MA), ranking member of the Senate Banking Committee.
UPDATE – Empower Defends Private Markets in 401(k)s Move in Response to Warren Letter
On June 18, Warren sent a letter to Empower Retirement CEO Edmund F. Murphy III, seeking answers about the company’s plans to allow retirement savers to invest in private equity and private credit, and the threats she sees that these types of investments pose to Americans’ retirement savings.
“Given the sector’s weak investor protections, its lack of transparency, expensive management fees, and unsubstantiated claims of high returns, we are seeking information on how your company will ensure the safety of the billions of dollars of retirement savings it safeguards as it implements this program,” Warren wrote in the letter.
“Pensions’ investments in private equity have been dubbed a ‘Wall Street time bomb.’ Even institutional investors admit their uncertainty as to whether private equity’s ‘very thin outperformance is worth the risk of opaque and illiquid investments whose actual value is often impossible to determine—investments that could crater when the money is most needed,’” Sen. Warren wrote in her letter to Empower.
“We are seeking information on how your company will ensure the safety of the billions of dollars of retirement savings it safeguards as it implements this program.”
Sen. Elizabeth Warren in her letter to Empower
“During a crisis or even momentary panic in the broader markets, private credit is more likely to experience liquidity freezes, inability to perform price discovery on their underlying assets, and lines of credit being terminated as traditional banks flock to safety,” Warren continued.
“Now, market volatility, the risk of inflation, and general economic uncertainty stemming from President Trump’s on-again, off-again tariffs have further exacerbated the risks of investing in the private markets,” Warren wrote. “Private equity funds are finding it increasingly difficult to sell their assets to payout investors or honor redemptions.”
Ranking Member Warren asked Empower to respond to a series of questions about the company’s partnerships with private equity firms—including providing details about how the company will continue to maintain high investor protection standards—by Monday, July 7.
In response to Warren’s inquiry, Empower told 401(k) Specialist today that its new initiative is designed to provide individuals with access to a broader range of investment options, enabling them to further diversify their investment portfolios.
“Investment decisions would be made by plan fiduciaries following a prudent process as outlined in the law (ERISA),” Empower’s statement reads. “Empower believes in the importance of advice and risk mitigation for every investor. These new opportunities are offered under an advice model for plan participants and deliver the guardrails necessary to help an entirely new investor class access private investing.”
“These new opportunities are offered under an advice model for plan participants and deliver the guardrails necessary to help an entirely new investor class access private investing.”
Empower statement to 401(k) Specialist
The statement closes by saying Empower welcomes dialogue with policymakers and regulators. “We will respond to Senator Warren.”
The six questions Warren (including several sub-questions) asks Empower to explain:
• How the company decided that access to alternative investments—including private equity funds—would be in the best interest of clients;
• Did Empower obtain legal guidance as to the liability it could face from enabling clients to invest in “risky” private market investments;
• How the company will continue to maintain high investor protection standards while allowing plans to invest in the private markets;
• Details of partnerships with Apollo, Franklin Templeton, Goldman Sachs, Neuberger Berman, PIMCO, Partners Group and Sagard;
• How Empower’s fee structure will change as a result of the partnerships; and
• How Empower plans on marketing investment products in the private markets to retirement plan sponsors.
PE momentum building
Private equity investments have historically been limited to large institutional investors and high-net-worth individuals. But since the PE-friendly Trump administration took over, a number of events (including Empower’s May 14 announcement) have cracked opened the door to making private equity investments more broadly available to a much wider swath of the U.S. population—retirement savers in workplace defined contribution plans.
Discussions in early 2025 suggest President Donald Trump is considering issuing an executive order mandating federal agencies—like the DOL, Treasury, and SEC—to explore allowing private equity options in the $9 trillion 401(k) market. The potential executive order would further ease legal concerns and promote the inclusion of private equity in retirement plans, put forth as a way to boost the economy.
In late March, BlackRock’s Larry Fink called for democratizing private market investing to help more Americans build wealth and improve retirement security, positioning it as a key step in addressing economic inequality and modernizing retirement strategies.
SEE ALSO:
• Trump Mulls Executive Order to Allow Private Equity in 401(k)s
• BlackRock’s Fink: Democratize Investing by Expanding Access to Private Markets
• SEC Embracing Wider Investor Access to Private Markets
• Empower Offering Private Investments in DC Plans
• Private Equity in 401(k)s ‘Will Happen’ says T. Rowe Price’s Rob Sharps
• Alternative Investments See $1.3T Growth Potential
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.