Nineteen organizations and individuals that advocate on behalf of consumers, workers, investors and retirees have called on the Department of Labor to withdraw its controversial policy statement opening the door to private equity investments in 401(k) plans.

In a June 24 letter to Secretary of Labor Eugene Scalia, the groups warn that “these investments are likely to saddle middle-class retirement savers with high costs and lock them into unnecessarily complex investments that underperform publicly available alternatives.” They call on DOL to withdraw the policy statement “until it can conduct a more careful and balanced analysis of the potential risks and benefits of including a private equity component in retirement plan investments.”

The letter responds to an information letter issued by DOL earlier this month that clears the way for private equity investments to be included within certain diversified funds – including target date funds – made available through workplace retirement plans, such as 401(k) plans.

In it the groups criticize DOL for basing its policy on a “one-sided consideration of the risks and benefits of private equity investments,” its failure to adopt adequate investor protections, and its over-reliance on plan sponsors, many of whom lack the financial sophistication necessary to determine whether the funds’ use of private equity is appropriate and represents a good value for plan participants.

Problems with the DOL policy derive from its having accepted unchallenged the private equity industry’s unfounded claim that “plan participants with longer investment horizons who invest a portion of their assets in private equities are likely to receive ‘enhance[d] retirement outcomes when compared to investment choices containing only publicly traded securities,’” the letter states. “But there are good reasons to challenge this assumption, starting with the fact that, in the absence of standardized performance calculations, private equity funds can and do manipulate those performance comparisons.”

In fact, recent research has shown that “Many if not most private equity investors aren’t getting any out-performance to reward them for the high fees, heightened risks and illiquidity associated with these investments. And industry trends suggest that any out-performance private equity has enjoyed in the past is likely to narrow dramatically or disappear entirely in coming years, just as vulnerable retirement savers are gaining ‘access’ to these alternative investments,” the letter states.

You can read the letter, which explains why DOL’s policy doesn’t adequately protect retirement savers, here.

Contacts: Barbara Roper, CFA at (719) 543-9468,
Diop Harris, AFREF at (269) 209-7733,


AFREF is a nonpartisan, nonprofit coalition of more than 200 civil rights, community-based, consumer, labor, small business, investor, faith-based, civic groups, and individual experts. We fight for a fair and just financial system that contributes to shared prosperity for all families and communities.

Consumer Federation of America (CFA) is a nonprofit association of more than 250 national, state, and local pro-consumer organizations. It was established in 1968 to advance the consumer interest through research, advocacy, and education.