By Utkarsh Shetti, Suzanne McGee, Arasu Kannagi Basil and Isla Binnie
March 30 (Reuters) - The U.S. Department of Labor on Monday issued long-awaited proposed new rules intended to clarify how retirement plans can add alternative assets ranging from private equity to cryptocurrencies to 401(k) accounts.
The measure, which is intended to ease long-standing barriers to incorporating these less liquid and less transparent assets in American retirement plans, follows an executive order from President Donald
Trump last summer and could clear the way for alternative asset management firms to tap a large and potentially lucrative new source of capital.
Industry groups have argued that private market investments can enhance long-term returns and diversification for retirement savers, while skeptics warn that higher fees, complexity and limited liquidity could pose risks for retail investors.
The guidance lays out how trustees, who have a fiduciary duty to act in the best interest of retirement plan members, as spelled out in the Employee Retirement Income Security Act (ERISA), can incorporate these assets into retirement plans.
These fiduciaries would have to "objectively, thoroughly, and analytically consider, and make determinations on factors including performance, fees, liquidity, valuation, performance benchmarks, and complexity", the DOL said.
Trustees who abide by these will be granted safe harbor status, protecting them from lawsuits, it added.
Treasury Secretary Scott Bessent said the proposed rule was "an initial step in implementing the President's Executive Order in a safe and smart manner, broadening access to additional retirement plan options for millions of Americans while being mindful of the importance of protecting retirement assets."
"Americans' ability to participate more fully in innovation and economic growth through well-diversified long-term investments is a vitally important priority for effective retirement planning," said Paul Atkins, chair of the U.S. Securities & Exchange Commission.
The move could be a boon for big alternative asset managers such as Blackstone, KKR, and Apollo Global Management as the new rules could open a vast pool of retirement savings for them.
They have grappled with a wave of withdrawals in their non-traded private credit funds in recent months amid investor jitters around the roughly $2 trillion industry.
The Managed Fund Association, a global trade group for the hedge fund and private credit industry, in September backed the move to allow retirement savers to shoot for bigger returns and diversify with alternative assets, but said safeguards must be erected.
"We look forward to continuing to work with the DOL on a final rule that supports innovation and maintains the robust investor protections Americans currently benefit from," a spokesman for the Investment Company Institute, a trade group, said in a statement Monday.
(Reporting by Utkarsh Shetti and Arasu Kannagi Basil in Bengaluru and Suzanne McGee; Editing by Shinjini Ganguli)
