Did 401(k) ‘Innovation’ Just Get Set Up to Fail?
Past attempts at financial democratization have often left the little guy with burned fingers.
Labor Secretary Lori Chavez-DeRemer opens up to alternative assets.
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“Investment innovation is a virtue, not a vice” under fiduciary law. So said Lori Chavez-DeRemer, the US secretary of labor, in this week’s landmark announcement that the company-offered pension plans her department oversees can start to invest in alternative assets, like private credit, private equity, infrastructure and cryptocurrencies.
The announcement, long floated, was a victory for the financial services industry — led by Larry Fink of BlackRock, subject of this essay last weekend — which has campaigned for so-called 401(k) pensions to be freed to invest more widely. The biggest long-term institutions had already done so; university endowments, pioneered by Yale in the 1980s, reaped big rewards by the innovative decision to pour money into private equity and esoteric hedge funds, while Canada’s huge collective pension groups are large investors in infrastructure and real estate.