Empower defends private market access in 401(k)s in response to Warren scrutiny

Empower is pushing back against concerns from Senator Elizabeth Warren over its plan to include private equity, credit, and real estate investments in 401(k) portfolios, arguing the shift reflects changes in public markets and growing demand from American workers.

In a July 7 letter to Warren, Empower CEO Edmund F. Murphy III defended the firm’s strategy, arguing that carefully regulated access to private markets is essential for modernizing retirement savings.

The move follows a letter from Warren last month that raised alarms about increased risk, illiquidity, and regulatory red flags tied to private investments.

"Forty years ago, the 401(k) brought Wall Street to Main Street," Murphy wrote. "Today, we are facing a similar moment. Private markets … have been among the highest-performing asset classes for decades. Yet the vast majority of retirement savers have been excluded from this growth.”

Empower said its proposal is structured with multiple safeguards, including employer vetting, ERISA-compliant fiduciary oversight, and portfolio design limits that restrict private market exposure to a small portion of diversified investment vehicles. The firm said the goal is not to broadly open up alternative assets, but to provide professionally managed access with appropriate checks.

"This is not an open door – it’s a carefully monitored gateway," Murphy wrote. "We believe the guardrails we have put in place will be effective in helping a new class of investors take advantage of private investing opportunities.”

Citing a shrinking universe of public companies – now fewer than 4,000 compared to nearly 8,000 in the 1990s – Empower emphasized the need to expand retirement plan investment options. The firm noted that early-stage growth is increasingly captured in private markets, where access has traditionally been limited to institutional and ultra-wealthy investors.

New Empower research conducted in June shows that many retirement savers are open to the shift. Among plan participants surveyed, 79% said retail investors should have access to the same investment products as institutions, and 76% expressed a desire for 401(k) options that reflect how markets have evolved.

In a statement released July 8, Murphy said Empower’s approach is part of a broader effort to modernize the retirement system. “The retirement landscape is changing, and it’s clear that limiting access to private markets in defined contribution plans no longer serves the best interests of American workers,” he said.

Warren, who serves as the ranking member of the Senate Banking, Housing, and Urban Affairs Committee, had previously criticized Empower’s direction, warning that such exposure “could crater when the money is most needed.” She cited historical enforcement actions involving some of Empower’s asset manager partners, including Franklin Templeton Investments, which she said at one point faced fines from the Securities and Exchange Commission and the Department of Labor for shortfalls by its subsidiaries.

Warren’s letter also questioned the liquidity and valuation challenges of private credit, especially during market stress. “Private credit is more likely to experience liquidity freezes, inability to perform price discovery on their underlying assets, and lines of credit being terminated,” she wrote.

Empower concluded its response by calling for continued public-private collaboration, saying past innovations like index funds and auto-enrollment have succeeded through cooperation between regulators and the industry.

"The US retirement system succeeds when it evolves," Murphy wrote. "We welcome collaboration with policymakers and regulators to develop and maintain a framework that both protects retirement investors and meets their evolving needs.”