DOL Proposes Guidance for Selection of Alternative Investments
The Department of Labor has released a proposed rule, “Fiduciary Duties In Selecting Designated Investment Alternatives”. According to a news release, the rule explains the steps that managers of 401(k) plans should take when considering alternative assets as a component in their investment lineups and establishes a set of process-based safe harbors for plan fiduciaries to use when selecting designated investment alternatives. The proposal follows President Trump’s Executive Order, “Democratizing Access to Alternative Assets for 401(k) Investors".
The proposal specifies that when selecting investment alternatives, plan fiduciaries would need to objectively and thoroughly examine and make determinations based on the following factors in satisfying the prudence requirement.
- Performance
- Fees
- Liquidity
- Valuation
- Performance benchmarks
- Complexity
The rule provides examples and analysis of each of the factors. Comments are due within 60 days of publication in the Federal Register.