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Invest with Us! Using Private Equity Fund Investment to Diversify ERISA Plan Investment

March 18, 2025 (4 min read)

ERISA plan fiduciaries are often asked to consider investment of retirement plan assets in a private equity fund. In the United States, private equity funds are structured with features for various investments like venture capital and buyouts. Managed by sponsors, they earn fees and share profits. Funds are often LLCs or LPs for tax efficiency. Structures include investment funds, GPs, and management companies, with additional entities for regulatory needs. The full commitment isn’t made up-front. During its fundraising period, investors, like plans, can make capital commitments to the fund. The full amount of capital an investor commits to invest is not collected up front. A capital call is the means by which private equity funds can request a portion of the committed capital from investors on an as-needed basis, so some liquidity is required to meet these calls.

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  • ERISA in Private Equity Fund Investment Negotiation
    See how plan fiduciaries of an ERISA retirement plan may wish to invest in alternative investments, such as private equity or hedge funds or other nontraditional asset classes, as part of their overall investment strategy. While there is no prohibition in ERISA or the Internal Revenue Code to doing so, in evaluating whether to make such an investment, the responsible fiduciary for the plan will need to consider its statutory responsibilities relating to investment management and the nature of the fund or investment as well as to document its decision-making process.
  • Private Equity Fund ERISA Assets Resource Kit
    Reference this resource kit providing guidance on the issues that arise when ERISA employee benefit pension plan (or an I.R.C. § 4975 plan) assets are invested in collective investment vehicles such as private equity funds. Under the look-through rule, the assets of a plan that acquires an equity interest in an entity (e.g., a private equity fund) are deemed to include both the equity interest of the entity and an undivided interest in the entity's underlying assets (unless an exception applies). Almost always—you’ll want the exception to apply.

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