Senator Elizabeth Warren (D-MA) at a Senate Banking Committee hearing
In May, Empower, the nation’s second largest 401(k) plan provider, launched a new program that will pave the way for private markets investments to be included within defined contribution plans. In June, Senator Elizabeth Warren wrote a letter to Empower’s CEO asking what safeguards the plan provider will put in place to protect Empower’s plan participants who choose to invest in private markets.
Now, Edmund F. Murphy III, President and CEO of Empower, has formerly responded to Sen. Warren’s inquiry. “Empower serves more than 19 million Americans, and our mission is clear: to help all individuals— regardless of income or net worth—build lasting financial security through access to well-designed, responsibly managed investment opportunities,” wrote Murphy in a letter to the Senator. “In our view, this should now include carefully structured access to private markets.”
Empower, which manages $1.8 trillion across 401(k) and other retirement accounts, has aligned with established private markets managers and custodians, including Apollo, Franklin Templeton, Goldman Sachs, Neuberger Berman, PIMCO, Partners Group and Sagard, to offer private investments through collective investment trusts (CITs) later this year. So far, five employers have signed on to offer private investments in their 401(k) plans when they become available in the third quarter.
Senator Warren (D-MA), Ranking Member of the Senate Banking, Housing, and Urban Affairs Committee, sent a letter to Murphy, wanting answers about the company’s new program that “seeks to push retirement savers contribution plans into private equity and private credit, and the threats that these investments pose to Americans’ retirement savings,” according to Sen. Warren.
“The retirement landscape is changing, and it’s clear that limiting access to private markets in defined contribution plans no longer serves the best interests of American workers,” wrote Murphy. “To deliver stronger, more diversified retirement outcomes, we must thoughtfully remove these barriers. Empower is committed to leading this evolution with the necessary safeguards and fiduciary rigor to protect and advance the interests of millions of savers.”
Forty years ago, the 401(k) plan “brought Wall Street to Main Street, giving most Americans access to the public markets to build retirement security,” he said. Now, “we are facing a similar moment. Private markets—including private equity, credit, and real estate—have been among the highest-performing asset classes for decades. Yet the vast majority of retirement savers have been excluded from this growth…because access has been historically limited to institutional investors and the wealthy.
“It’s time to change that.”
Related: Senator Warren questions Empower on ‘risks’ of new 401(k) ‘private market investments’ initiative
“The U.S. retirement system succeeds when it evolves. Innovations such as mutual funds, target-date funds, index investing, and automatic enrollment have all improved outcomes for millions of savers. It’s time we bring the same mindset to private markets investing—responsibly, thoughtfully, and with clear oversight.
In response to Sen. Warren's concerns, Murphy said he would work with policymakers and regulators "to develop and maintain a framework that both protects retirement investors and meets their evolving needs.”
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