Credit: Olivier Le Moal/Adobe Stock
Not only is Empower, the nation’s second largest 401(k) plan provider, defending any criticisms against its newly launched program that will pave the way for private markets investments to be included within DC plans, the provider conducted its own study on the subject: 79% of retirement plan participants believe all investors should have access to the same investment products as institutional investors, says Empower.
This Accelerating Access study, based on responses from 2,205 Americans – including 1,008 respondents who participate or had participated in an employer-sponsored retirement plan – comes on the heels of Empower’s announcement in May of a new program that paves the way for private market investments within defined contribution retirement plans.
In June, Senator Elizabeth Warren wrote a letter to Empower’s CEO Edmund F. Murphy, III, asking what safeguards the plan provider will put in place to protect Empower’s plan participants who choose to invest in private markets.
Participants can only access these private investments through managed account services on Empower’s platform. In the survey, 76% believe expanding 401(k) options to include professionally managed private investments would be a positive step for retirement savers.
Also, 73% agree that having professionally managed private investments in retirement plans helps level the playing field for everyday investors, and 79% think American workers/retail investors should have access to the same investment products as institutional investors. The majority of respondents (74%) say including private investments in 401(k)s/retirement plans can help workers build wealth in ways previously limited to the ultra-wealthy.
As part of the Empower program, a managed account adviser will ensure that allocations are aligned with an individual’s risk tolerance, time horizon and financial objectives, typically a range from 5% to 20%, depending on participant’s age. According to the survey, nearly one-third of Americans (31%) (34% of plan participants) say they “would allocate” 10-15% of their retirement savings to private investments such as private equity, private real estate, and private credit. 44% say they “would be comfortable allocating” 1-10%. (46% overall).
Empower, which manages $1.8 trillion across 401(k) and other retirement accounts for 19 million Americans, has aligned with established private markets managers and custodians, including Apollo, Franklin Templeton, Goldman Sachs, Neuberger Berman, PIMCO, Partners Group and Sagard, to offer these 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.
“This research uncovers how American workers are thinking about being able to invest in new ways, outside of public markets,” said Edmund F. Murphy, III, president and CEO, Empower. “Clearly, private investing is of great interest to individuals. It’s not for everyone, but those who wish to seek such investments should have the right and the ability to do so.”
Murphy noted that 74% of respondents say including private investments in retirement plans can help workers build wealth in ways previously limited to the ultra-wealthy, and 72% say diversifying their retirement portfolio with some private market investment exposure could improve long-term retirement outcomes. Also, 76% of survey respondents want their employer/401(k) provider to offer options that reflect how the investment world, including private markets, is evolving.
Related: Empower defends its ne 401(k) ‘private market’ move, in response to Sen. Warren
“As the world changes,” Murphy continued, “we need to change, too. Investing choices have evolved, and we want to provide American workers with the options they are looking for with new, innovative alternatives, which is why we are expanding in this direction.”
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.