Making private assets accessible to your 401(k): Expert weighs in

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20 hours ago

Empower announced that it will be offering private market investments and real estate opportunities for clients' 401(k) plans.
Bow River Capital managing director of evergreen strategies Jeremy Held sits down with Wealth's Brad Smith to speak more about these trends and the illiquid nature of these asset classes.
Hear more about three types of alternate assets to consider adding to your personal portfolio.
To watch more expert insights and analysis on the latest market action, check out more Wealth here.
Wall Street is increasingly interested in bringing private assets to everyday investors.
Financial services firm Empower, which oversees $1.8 trillion in 401k accounts for 19 million people, recently announced that it will offer private credit, equity, and real estate into some of its accounts later on this year.
But there are certain issues tied to private assets and mainstream use.
According to our very own Bob Powell, private assets can be complex and illiquid, meaning they aren't.
Easily bought or sold, these assets tend to have higher fees and there's less transparency because private companies aren't subject to the same disclosure rules as public companies.
Our next guest says that there's plumbing that will have to be modified to allow these assets into 401ks.
Here with more we've got Jeremy Held who is the managing director of Evergreen Strategies at Boat River Capital.
Great to have you here with us.
Boat River we know is a Denver-based.
Alternative asset managers specializing in private credit equity and real estate among other assets.
So what kind of changes do need to be made to that plumbing in order for this to be reality and accessible to more people saving for retirement?
Yeah, look, I think the 401k market is a huge opportunity for investors to access the same types of private investments that institutional investors have had for years.
The problem is and the challenges, and these are challenges that can be overcome.
Is that the plumbing, the operations, the mechanics of investing in 401ks is really made for mutual funds with daily accessibility, and I do think that the benefits do outweigh some of those challenges in terms of accessing just a much broader set of investments so I do think that.
The 401k industry, the private equity industry, the, the operations firms that access the space will definitely make changes because I think it's in the, in the best interest of investors to have access to private companies in addition to public companies.
And so we had talked about the liquid nature of some of these investments if they were packaged up and put into a broader investment vehicle for retirement.
Should people who are saving for retirement still be concerned about the illiquid nature or what should be the thought process or the conversations you're having?
Yeah, you know it's, it's a great question.
I think you know what investors should be asking themselves at all times, whether they're retirement investors, taxable investors, is do I need to have 100% of my assets, 100% liquid, 100% of the time.
And if the answer to that is no, even if it's 85% or 90 or 95% of their assets are liquid, if they open up a small percentage to being illiquid, you can really open up the opportunity set for investors and and invest in a much broader array of companies.
And so with that in mind, what is kind of the time horizon that you see more often among the clients that you're working with?
Yeah, I mean, typically.
We're working with long term oriented clients.
They're they're building a financial plan for 5 years, 10 years, 20 years and beyond.
I mean you think about it, 401k accounts are really ideally suited for a long investment horizon.
You have people that are contributing to their 401k accounts in their 20s and 30s.
They have a long term time horizon, and I think private assets are really ideally suited for that time horizon for some of those private assets.
I, I wonder what happens and how do you approach it when a private company.
Makes their foray into becoming a publicly traded company because obviously the liquidity profile then changes significantly.
It does and I think what's happened a lot over the past really two or three decades, there's half as many public companies today as there were in the 90s.
Companies are staying private a lot longer.
A lot of private, a lot of public companies are being taken.
And so there is that that opportunity for a private company to go public, but there's also the opportunity for public companies to go private, and I think investors want to have access to that broader that broader universe.
What are the other assets outside of companies as we talk about and think about real estate and the credit side of this too?
Yeah, I think when people think about accessing markets today.
They're not just thinking about public or private, they're saying I want an allocation to real estate and I'm gonna own some public real estate and some private real estate.
I want an allocation to credit.
I'll own some public credit and some private credit and the same thing, of course, in in equity.
I'm gonna own public equities and private equity.
And they think about how do I build the most diversified portfolio possible and that includes both public and private assets.
What's the entry point for a retirement vehicle like this?
Yeah, I think Evergreen funds, which are a new type of vehicle that are really transforming the way people access private investments, is really the best entry point.
These are vehicles that are immediately invested.
They're highly diversified minimums as low as $50,000 and that's really a much more efficient way for a broader universe like 401k investors to access the private markets.
Do you see those minimums going lower in the future as more people try to gain exposure?
I do.
I do think there's gonna be some changes from a regulatory perspective.
Historically, alternative investments have been limited to qualified purchasers, accredited investors.
Those eliminations, those restrictions are going away, and I do think you'll see minimums go from what used to be 5 million now it went to $1,050,000 and ultimately those will go even below there.
Great to have you here with us, Jeremy in town from Denver, Colorado.
Appreciate the time.
Yeah, thanks, Brad.