Latest news with #EmployeeRetirementIncomeSecurityActof1974
Mint
12 hours ago
- Business
- Mint
Vijay L Bhambwani's Ticker: Retail bulls latching on to slender hope
Dear reader, Last week, I wrote that the markets were headed towards a tipping point that would determine near-term trends. Bulls failed to revive sentiments, and the markets fell for the sixth week in a row. I have not seen this sequence of weekly declines for multiple years. Big money has been unwinding their positions, and retail buyers are trying to absorb the supply, with limited results. The retail segment continues to display signs of a bullish hangover and is buying the dips in reflex action. That is validated by the fact that retail borrowing in the MTF (margin funded trading—money lent by brokers to invest in stocks) has fallen by a mere 0.73% after expiry of the July series. Market-wide position limits (MWPL), which indicate the percentage exposure utilised by traders as a component of total exposure permitted by Sebi, have also risen. Higher MWPL is a double-edged sword as it indicates confidence levels in a rising market. On the flip side, it makes the market weaker on the way down as traders scamper to exit recent trades in a crowded exit fashion. Price volatility invariably spikes. This is a clear and present danger that my readers must brace for. The roller coaster ride on account of newsflow continued unabated as US President Donald Trump sprang a negative surprise on India by imposing 50% tariffs. On the global markets front, there are two bits of news that can extend a sliver of hope to the bull camps. Firstly, Donald Trump has signed the executive order to allow US citizens' retirement savings (Plan 401k) to be invested in riskier assets. That includes but is not limited to equities and cryptocurrencies. Secondly, Trump and Putin will meet on 15 August in Alaska to consider ways and means to end the Russia-Ukraine war. The first trigger is a short-term positive and long-term negative because retail traders seldom look past their noses. Empirical evidence is testimony to the negative fallout of retirement money influencing markets by its entry and exit. The US market fall of 2008 due to the plan Employee Retirement Income Security Act of 1974 (Erisa) is an example. The second trigger is a positive one, provided a solution is found. This week, the action will continue to be focused on public sector undertakings (PSUs) and banks in particular. The Reserve Bank of India (RBI) maintained the status quo and kept interest rates constant, setting the tone and tenor of the money markets as hawkish. With oil and gas prices falling, the stock prices of companies using fossil fuels as raw materials may rise marginally or fall less in case markets are weak. In the commodities space, oil and gas are likely to face selling pressure on advances. I maintain that energy markets are well supplied and that shortages exist only in the narratives. Metals are also likely to be sold on advances if the markets cheer the Trump-Putin meeting on 15 August. Bullion remains a long-term bullish story, as I have been maintaining for many quarters now. Just look beyond calendar 2025 and avoid leveraged buying since the financing costs eat into your profits. Continue to trade light and maintain tail risk (Hacienda) hedges for capital preservation. The week is truncated due to the Independence Day holiday. Usually, shorter trading weeks imply an uptick. A tutorial video on tail risk (Hacienda) hedges is here. Rear-view mirror Let us assess what happened last week so we can gauge what to expect in the coming week. The fall was led by the banking and financial stocks, which are the heaviest-weighted sector in the Nifty. The broad-based Nifty 50 followed suit. Bullion rallied on safe-haven buying and a weaker US dollar index. Oil and gas fell as energy markets were well supplied. The weaker dollar rallied against the rupee, dragging market sentiments lower. Indian 10-year bond yields rose, which was negative for banking stocks. Banks are the biggest holders of sovereign bonds. The National Stock Exchange (NSE) lost market capitalisation as the selling was broad-based. Market-wide position limits rose routinely after expiry. US headline indices rose and provided tailwinds to our markets. Retail risk appetite – I use a simple yet highly accurate yardstick for measuring the conviction levels of retail traders—where are they deploying money? I measure what percentage of the turnover was contributed by the lower and higher risk instruments. If they trade more of futures, which require sizable capital, their risk appetite is higher. Within the futures space, index futures are less volatile compared to stock futures. A higher footprint in stock futures shows higher aggression levels. Ditto for stock and index options. Last week, this is what their footprint looked like (the numbers are the average of all trading days of the week) – Turnover contribution collapsed in the higher-risk, capital-intensive futures segment as risk appetite fell off a cliff. The turnover contribution rose in index options, the relatively lower-risk and lower capital-intensive options segment. This is the least risky segment in the entire derivatives segment. Overall, risk appetite was substantially lower. Matryoshka analysis Let us peel layer after layer of statistical data to arrive at the core message of the markets. The first chart I share is the NSE advance-decline ratio. After the price itself, this indicator is the fastest (leading) indicator of which way the winds are blowing. This simple yet accurate indicator computes the ratio of the number of rising stocks compared to falling stocks. As long as the gains outnumber the losses, bulls are dominant. This metric gauges the risk appetite of one marshmallow traders. These are pure intraday traders. The Nifty logged smaller losses last week, but the advance-decline ratio eased to 0.75 (prior week 0.80). That tells me there were 75 gainers for every 100 losers. This is a poor show by intraday traders. Ideally, this metric should stay above 1.0 to signal sustainable bullishness. A tutorial video on the Marshmallow theory in trading is here. The second chart I share is the market-wide position limits (MWPL). This measures the amount of exposure utilised by traders in the derivatives (F&O) space as a component of the total exposure allowed by the regulator. This metric gauges the risk appetite of two marshmallow traders. These are deep-pocketed, high-conviction traders who roll over their trades to the next MWPL reading rose routinely after expiry, but the rise was smaller than the commensurate week in the prior two months. That tells me optimism, though present, is tempered by caution. As I wrote earlier, very high MWPL readings are a double-edged sword. A dedicated tutorial video on how to interpret MWPL data in more ways than one is available here. The third chart I share is my in-house indicator, 'impetus.' It measures the force in any price move. Last week, both indices fell. The impetus readings for both indices have fallen significantly with price declines. That tells me there was no forceful sell-off last week, and prices slid lower on account of expiry and lack of adequate buying. The final chart I share is my in-house indicator 'LWTD.' It computes lift, weight, thrust and drag encountered by any security. These are four forces that any powered aircraft faces during flight, so applying them to traded securities helps a trader estimate prevalent sentiments. The Nifty recorded smaller losses last week, and the LWTD indicator rose, too. However, it remained in negative territory at -0.10 (prior week -0.34). That tells me short covering may have improved over the prior week, but fresh aggressive buying may have been lacking. Short covering can cushion declines and even trigger a temporary rally, but a sustained bull run needs fresh big-ticket buying. A tutorial video on interpreting the LWTD indicator is here. Nifty's verdict The weekly chart of the Nifty shows a sixth consecutive week of declines. That has not occurred in many years. The price has breached the 25-week average, which is a proxy for the six-month holding on the cost of a retail investor. A breach of this average suggests recent investments are incurring notional losses and can create short-term psychological pressure on bulls. The persistent selloff also creates an overhead supply as trapped buyers at higher levels rush for the exit door on advances as their breakeven costs are achieved. A reliable rally is possible only after the overhead supply has been absorbed completely. Last week, I advocated watching the 24,200 level on the Nifty as a support area. That holds for now. I suggest watching the same level this week, too. If bulls manage to defend this threshold, a short-term bounce can occur. Only sustained trading above 24,750 levels can indicate the possibility of further upsides. Your call to action – Watch the 24,200 level as near-term support. Only a breakout above the 24,750 level raises the possibility of a short-term rally. Last week I estimated ranges between 56,800 – 54,450 and 25,075 – 24,050 on the Bank Nifty and Nifty respectively. Both indices traded within their specified resistance levels. I estimate this week's ranges between 56,150 – 53,850 and 24,875 – 23,850 on the Bank Nifty and Nifty, respectively. Trade light with strict stop losses. Avoid trading counters with spreads wider than 8 ticks. Have a profitable week. Vijay L. Bhambwani Vijay is the CEO of a proprietary trading firm. He tweets at @vijaybhambwani
Canada News.Net
a day ago
- Business
- Canada News.Net
Crypto, private equity eyed for 401(k)s under new Trump directive
NEW YORK CITY, New York: Millions of Americans saving for retirement could one day see private equity and cryptocurrency added to their 401(k) investment options under an executive order signed by President Donald Trump, potentially giving these industries long-coveted access to trillions of dollars in retirement funds. The order directs the Labor Department and other agencies to redefine what qualifies as an approved asset under the Employee Retirement Income Security Act of 1974 (ERISA), which governs U.S. retirement plans. Currently, most 401(k) accounts are invested in stocks, bonds, cash, and a small share of heavily traded commodities like gold. Employers are legally required to act in the best interests of their employees when offering investment options. There will be no immediate changes. Federal agencies must first draft and finalize new regulations, likely a process of months or longer, before employers can expand available choices. Once implemented, retirement plans could include alternative assets such as private equity, cryptocurrencies, and real estate. The move is a win for the US$5 trillion private equity sector, which has long sought access to 401(k) accounts, and for cryptocurrency firms, many of which supported Trump's 2024 campaign and are seeking mainstream acceptance. Bitcoin rose two percent this week to $116,542, nearly doubling since Trump was elected. Under former President Joe Biden, regulators approached crypto investments in retirement accounts "with extreme care" due to volatility. Cryptocurrencies such as Bitcoin and Ethereum can swing 10 percent in a single day, compared with two percent to three percent for major stock indexes. "It was inevitable that bitcoin would make its way into American 401(k)s," said Cory Klippsten, CEO of Swan Bitcoin. "As fiduciaries realize bitcoin's risk-adjusted upside over the long term, we'll see growing allocations, especially from younger, tech-savvy workers." For private equity firms, 401(k) access would unlock a vast pool of new capital. Blackstone CEO Steve Schwarzman has described this as a "dream" for the industry since at least 2017. Private equity has historically returned about 13 percent annually since 1990, versus 10.6 percent for the S&P 500, but investments are illiquid, often tied up for years until underlying companies are sold. Bryan Corbett, president and CEO of the Managed Funds Association, said the industry looks forward to creating "a thoughtful framework" with the Trump administration to expand retirement options "with appropriate investor guardrails." Even after new rules are finalized, it could take years before private equity and crypto appear widely in retirement plans. Major firms like Fidelity, Vanguard, and T. Rowe Price would need to design compliant products, and employers may be slow to change plan menus. Vanguard said it has not committed to offering private assets in defined contribution plans but will continue to educate investors "to ensure a clear understanding of the opportunities and risks."
CNBC
a day ago
- Business
- CNBC
Crypto may be coming to 401(k) plans, but it'll be a while before it's easily accessible
The crypto market this week cheered as President Donald Trump signed an executive order meant to open retirement plans to alternative assets including cryptocurrencies. The move from the White House has the potential to be a game changer for the adoption of digital assets. It could help turn them into mainstays of the U.S. financial market by expanding access and encouraging longer-term investing in crypto. Bitcoin , which has been riding a big wave of institutional acceptance and adoption since last year's debut of U.S. bitcoin ETFs , could one day become more established within financial services. It probably won't happen soon based on the White House's greenlight alone. It's even more unlikely investors will be directing BONK , Pudgy Penguins or other meme coins to their retirement accounts. "On the surface, it's exciting to see digital assets getting presidential-level attention," said Doug Boneparth, certified financial planner and founder of Bone Fide Wealth. "It signals continued legitimization of the space and shows how far we've come since bitcoin was just an internet curiosity. But the reality is a lot more nuanced." Employer adoption is key First of all, under the Employee Retirement Income Security Act of 1974 (better known as ERISA), major changes to investment menus require thoughtful guidance and buy-in from plan sponsors – especially if they involve volatile and still-maturing asset classes like crypto, Boneparth noted. For example, Fidelity in 2022 became the first retirement plan provider to give savers the option of putting bitcoin in their 401(k)s. However, employers must be willing to adopt the offering in the first place. That "came down to employers' risk tolerance and fiduciary responsibility. That's not changing overnight with an [executive order]," Boneparth said. Employers' fiduciary duty requires them to comply with ERISA and to run the plan in the best interest of the participants and beneficiaries. Further, too many investment options can be a barrier to participation, said Preston Cherry, CFP and founder of Concurrent Financial Planning. While increased access to crypto may be a plus, "people become overwhelmed with the investment menu options" which leads to a "lack of participation," he said. Even when there is education available on these investment options, employees have to elect to receive it — and those participation rates are typically low, Cherry added. Combine those considerations with high-risk assets, and employers' fiduciary responsibility has to kick in. "What happens with all the other altcoins?" Cherry said, separating out bitcoin, ether and the Solana token. "There should be oversight on that from the investment committee or plan sponsor overseeing what digital currencies actually get accepted and should for sure be educating on it." "There's potential upside in digital currencies, but a lot of folks can't understand 30%, 40%, 50% drawdowns – and it could be destructive," he added. "I'm not saying don't invest in crypto, but be crypto cautious." It depends on recordkeepers and 401(k) plan providers The retirement market had $43 trillion in assets in the first quarter, almost $9 trillion of which was held in 401(k) plans, according to the Investment Company Institute. The crypto market cap is nearly $4 trillion today. The executive order is the latest in a series of efforts under the Trump administration to make the U.S. the "crypto capital of the world." In July, he signed stablecoin legislation known as the GENIUS Act into the first official U.S. crypto law . The Securities and Exchange Commission recently debuted " Project Crypto ," an initiative to modernize securities regulations to allow for crypto-based trading. "The plan providers, the third-party providers, the recordkeepers, are going to decide the end result here, if they want to put crypto in or not," said Tyrone Ross, CEO of registered investment advisor 401 Financial. "This is part of this administration's goal to make crypto the epicenter of the world and to have it grow here," he added. "They're all-in, but the Fidelities of the world, the Schwabs, the MassMutuals, the Vanguards of the world – I don't know if they're just going to go, 'OK, we're going to do it.'" Boneparth echoed that the order is more "more symbolic than structural right now." However, this shouldn't diminish the significance of Washington's blessing of the crypto industry. Further, an education opportunity has just opened up in the retirement sector. "As someone who believes in the long-term role of bitcoin in a diversified portfolio, I'm hopeful," Boneparth said. "But as a fiduciary, I know our job is to help clients weigh the opportunity and the risk." "If we do this right, the door opens a little wider to the future of retirement investing," he said. "If we don't? Well then, who knows what meme coin we're going to see on a retirement plan statement."
Nahar Net
2 days ago
- Business
- Nahar Net
Trump opens door for private equity and crypto as 401(k) retirement plan options
by Naharnet Newsdesk 08 August 2025, 15:11 Millions of Americans saving for retirement through 401(k) accounts could have the option of putting their money in higher-risk private equity and cryptocurrency investments, according to an executive order signed Thursday by President Donald Trump that could give those financial players long-sought access to a pool of funds worth trillions. There is no immediate change in how people invest part of their work earnings. Federal agencies would need to rewrite rules and regulations to allow the expanded choices, and that would take months or more to complete. But once done, employers could offer a broader array of mutual funds and investments to workers, according to the White House. New plans could invest in alternative assets, particularly private equity, cryptocurrencies and real estate. The Republican president's order directs the Labor Department and other agencies to redefine what would be considered a qualified asset under 401(k) retirement rules. Americans' retirement plans are governed by a law known as the Employee Retirement Income Security Act of 1974, better known as ERISA. Employers are required by law to offer retirement options that are in the best interest of their employees, not Wall Street. Most retirement plans for Americans are made up of stock and bond investments, and to a much lesser extent, cash and heavily traded commodities such as gold. Trump's move rewards both the $5 trillion private equity industry, which for decades has wanted to compete for a role in retirement plans, and the cryptocurrency industry, whose executives strongly supported Trump's 2024 campaign as they aimed for more mainstream acceptance among Americans. The price of bitcoin was up 2% on Thursday to $116,542 and has nearly doubled since Trump was elected. Under Democratic President Joe Biden, federal regulators were to treat cryptocurrency investments with "extreme care" because of the extreme volatility of crypto. It is not uncommon for bitcoin, ethereum and other big cryptocurrencies to move up or down 10% in a single day, whereas a 2% or 3% single-day move in the stock market would be considered historic. For cryptocurrency companies, which donated millions to Trump's campaign as well as his inauguration, one goal was to get their industry qualified under ERISA. Coinbase, one of the largest crypto companies in the United States, was also a major donor toward Trump's military parade in Washington this summer. Under Trump, the Securities and Exchange Commission dropped its lawsuit against Coinbase, where the Biden administration said crypto should be treated as a security. Crypto is particularly popular among young Americans. While volatile, bitcoin has generally moved upward since it was created by an anonymous programmer nearly 20 years ago. "It was inevitable that bitcoin would make its way into American 401(k)'s," said Cory Klippsten, the CEO of Swan Bitcoin. "As fiduciaries realize bitcoin's risk-adjusted upside over the long term, we'll see growing allocations, especially from younger, tech-savvy workers who want hard money, not melting ice cubes." Private equity firms rely heavily on high-net-worth individuals and state and private pension plans, which have extremely long investment timelines. But having access to Americans' retirement assets would open up a deep pool of cash. Blackstone CEO Steve Schwarzman has told investors going back to at least 2017 that it was a "dream" of his and the industry to be able to draw upon these retirement assets. Previous administrations, Republican and Democrat, have agreed that private equity investments, which can be riskier, more expensive and less liquid than traditional stock and bond market mutual funds, should not be included in 401(k) plans. The average historic annual return on private equity assets going back to 1990 is roughly 13%, net of fees, according to Cambridge Associates. The S&P 500 index has had an approximate annual return, including dividends, of roughly 10.6% in the same period of time. However, private equity assets tend to be locked up for years, because the companies underlying the assets have to be sold on the private market, making them highly illiquid compared to stocks, which can be sold in a day. "We look forward to working with the Trump Administration on a thoughtful framework that expands access to alternatives for retirement savers, offering Americans more diversification and investment options with appropriate investor guardrails," said Bryan Corbett, the president and CEO of the Managed Funds Association, which is the trade group for the private equity industry. Even after the regulations are written, it will take time for major retirement plan companies, such as Fidelity, Vanguard, T. Rowe Price, and others, to develop appropriate funds for employers to use. Employers are unlikely to revise their retirement plan options quickly, so it may take several years before crypto and private equity investments become mainstream in an individual's retirement plan. "While Vanguard has not committed to launching a product for defined contribution plans, Vanguard is dedicated to educating retirement investors to ensure a clear understanding of the opportunities and risks of investing in private assets," the company said in a statement.
CNBC
2 days ago
- Business
- CNBC
Alternative assets are headed for your 401(k) — here's what investors need to know
President Donald Trump 's new executive order paves the way to bring alternative assets into 401(k)s, but what that will eventually look like — and how complicated it may be — remains to be seen. The order, signed by the president on Thursday , directs the Secretary of Labor to reexamine fiduciary guidance on alternative investments — such as private equity, private credit and cryptocurrencies — in 401(k) and other defined-contribution plans. Those plans are governed by the Employee Retirement Income Security Act of 1974, or ERISA. Adding alternative assets can be a complex endeavor for 401(k) plan sponsors, thanks to issues including liquidity, transparency and fees. However, investors will have some time before the offerings become available. The employer-sponsored retirement plans move slowly, even when things aren't complicated, said Jason Kephart, senior principal for multi-asset strategy ratings at Morningstar. "We're still very 'day one' for plan sponsors to get comfortable, to get the approval. It's going to take many quarters," he said. "There's still a very big question if plan sponsors will actually get comfortable enough to make these an option." Some $12.2 trillion was held in defined contributions plans, which include 401(k)s and 403(b) plans, as of the end of the first quarter, according to the Investment Company Institute . About $8.7 trillion of that is in 401(k)s. One size doesn't always fit Bonnie Treichel, an attorney who specializes in ERISA, believes it is inevitable that assets such as private equity, private credit, hedge funds, real estate and cryptocurrencies are coming to the defined contribution market. The onus is on the plan fiduciaries, both financial advisors and the plan sponsors, to know how to vet the options and make them available to participants, she said. They also aren't obligated to offer the investments at all, she noted. "The plan sponsors' job is to offer an investment lineup that is in the best interest of the plan and its participants, and that meets the needs of those participants," said Treichel, founder of Endeavor Retirement. "It's not a one-size-fits all when it comes to retirement plans." Treichel doesn't see alternative assets becoming available as a standalone investment option in a 401(k), at least just yet. "They're probably going to be as part of a managed account. They're going to be as part of a target date fund," she said. "It's not going to be the participant can go put 20% of their total plan assets into a hedge fund. That hedge fund is going to be within a target date fund, so a participant is not necessarily choosing how much they allocate to a hedge fund or private credit." Part of the whole Prime Capital Financial's Jania Stout, president of the firm's retirement and wellness businesses, also anticipates the options are likely to be inside a target date fund, with a small percentage allocated to private markets, or managed accounts. The latter would have someone managing the pool of assets and having fiduciary oversight of the assets, she noted. "I believe plan sponsors can feel a lot more comfortable doing it that way, than just having it as another option stand alone in their retirement plan," she said. "I don't think we're there yet." Morningstar's Kephart believes that first offering the investments in managed accounts, which investors often have to opt into, will make plan sponsors more comfortable, he said. "I think the product development for the 401(k) plan, it's going to happen in collective investment trusts," he said. Collective investment trusts are pooled investment vehicles available to individual investors only through retirement plans. They will likely have to use cash, perhaps upwards of 20%, to manage the illiquidity of private assets, he said. "That's also going to water down your private market exposure," he said. "It brings the question of — at the end of the day, is it worth it if you have to take all these extra steps to make it fit?" Higher fees Adding exposure to alternative assets could also cost you more money. Fees are almost always higher on private assets, for instance, and they are not always clear. "A lot of expense ratios do not have to include the expected incentive fee expense," Kephart pointed out. "What we've seen in private market funds is the incentive fee expense is usually at least as high as the management fee, if not higher." For instance, a lot of index-based target-date funds have expense ratios of 0.10% or lower, he said. Private market funds start at around a 1% management fee, plus the incentive fee, he added. If a plan ultimately offers some form of alternative asset allocation and investors aren't interested, they can talk to the advisors associated with the plan about other investment options, Treichel said. Typically plan participants can choose between something like a target -date fund, passive strategies, active options and perhaps a brokerage window, she said. Stout agrees there will always be a choice. "Most prudent plan sponsors allow people to opt out of it," she said. "The question will be — is it going to be an opt in or an opt out? And that's what committees have to decide when they're evaluating this at their fiduciary committee meetings." Encouraging guardrails Certified financial planner Chuck Failla, founder of Sovereign Financial Group, thinks 401(k)s should have some type of guardrails in place to ensure those investing in private markets are accredited investors, which means they have a net worth of at least $1 million. "If you don't have a $1 million liquid, you should probably stay away from alts until you have some more liquidity backed up," said Failla, who offers private market access to his mass affluent clients through a fund. Investors should also consider how the assets are ultimately integrated. For instance, if plan sponsors try to limit the risks that inherently come with investing in the space, it could ultimately affect the investments' returns, said Tony Roth, chief investment officer for Wilmington Trust Investment Advisors. In addition, trying to manage the liquidity issue by packing private assets in something like an interval fund, which provides limited liquidity, may also restrict returns, he added. "One of the reasons that private market' return is so much better is because you get compensated by giving your money away for an extended period of time where you can't get it back," Roth explained. That said, alternative assets could help provide diversification that is missing from the market these days, he said. The major indexes are tilted toward larger-cap companies and many companies are staying private for longer — dwindling the pool of small- and mid-cap companies, he added. "There's a lot more opportunity for alpha or outsized performance in private markets," Roth said. "You have to end up trusting the right people to make those investments for you, because it can go in the wrong direction as well."
