The push towards private investments in 401(k) plans seems to be proving successful for some.
Great-West Lifeco, the parent company of Empower, announced this morning that over 200 retirement plan sponsors who utilize Empower have adopted private markets in their retirement platforms.
The announcement comes as the insurance corporation reports strong earnings for the third quarter, with an increase in base earnings of 15% from Q3 2024, and a growth in net earnings by 35% since the third quarter last year.
Empower unveiled its steadfast push into the private market in May, just months before President Donald Trump signed an executive order that directed the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) in offering private investments in retirement plans.
The recordkeeper’s partnership with top private investment fund managers and custodians, including Apollo, Frankin Templeton, Goldman Sachs, Neuberger Berman, PIMCO, Partners Group, and Sagard, would safeguard its success with the new strategy.
Private investments offered through these firms may be implemented through collective investment trusts (CITs), providing limited exposure to diversified pools of private equity, private credit and private real estate, a structure that is designed to provide liquidity protection and reduced fee exposure.
Empower’s initiative sent shockwaves in the industry, as many expressed feeling skeptical in offering illiquid and volatile investments in participant retirement accounts, while others continued to associate private funds with the dramatic fallout of cryptocurrency exchange platform FTX.
The move from the recordkeeper even garnered attention from lawmakers, who questioned the firm’s intentions and whether it was prioritizing profits over consumer’s financial safety. Following the announcement, Sen. Elizabeth Warren (D-MA) issued a letter probing Empower Retirement CEO Edward F. Murphy III on the company’s plans to allow private funds in retirement investments and voicing her distrust with the private market.
“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,’” Warren, who is also ranking member of the Senate Banking Committee, wrote in her letter to Empower.
The potential threat doesn’t seem to have deterred many, however. A number of asset managers have signaled their willingness to allow private markets in retirement investing, while others have partnered to sell private market products to retail investors.
A survey from Empower showed increasing interest in private markets among plan sponsors. In the survey, which fielded responses from 205 private sector 401(k) and 403(b) benefits administrators in the U.S., 96% of employers said they would likely add private market investments if fiduciary and regulatory guidance were clarified.
Separate research from BlackRock and Schroders also noted interests in private markets among plan sponsors and retirement plan participants.
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with nearly a decade of experience and a passion for telling stories and reporting news. She is originally from Queens, New York, but now resides in Denver, Colorado.
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