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    Oct. 16, 2025

Structural Challenges PE Sponsors Must Overcome to Expand Into 401(k)s (Part One of Two)

Over the last decade, significant strides have been made to broaden retail investors’ access to private market investment opportunities across a number of alternative asset classes, including private credit, PE, real estate and infrastructure. Despite those efforts, however, many U.S. retirement savers continue to miss out as defined contribution plans (e.g., 401(k) plans) mostly invest in public market assets held in mutual funds and collective investment trusts. Accordingly, the next frontier in the inexorable march toward the retailization of private markets is to improve access through the multitrillion-dollar 401(k) plan market. To achieve that objective, stakeholders in the alternative asset management and 401(k) industries are seeking ways to collaborate and innovate with the goal of creating more investment choices for U.S. retirement savers. This first article in a two-part guest article series by Alston & Bird partner Blake E. Estes describes the mounting pressure on 401(k) plan sponsors to offer access to alternative assets and the structural challenges impeding those efforts. The second article will detail 401(k) plan‑friendly product designs that fund managers can offer; other considerations to weigh when entering the 401(k) space; and the regulatory guidance that created past confusion and future hope for including alternative assets in 401(k) plans. For additional insights from Estes, see “Growing Popularity, Numerous Benefits and Operational Obstacles of Retail Distribution Platforms (Part One of Two)” (Sep. 4, 2025).

Executive Order on Alternative Assets in 401(k) Plans: Navigating ERISA Litigation Risks (Part Two of Two)

The latest salvo in the long-running battle over the inclusion of private fund assets in employee benefit plans (e.g., 401(k) plans) occurred when President Donald J. Trump issued an executive order (Order) on August 7, 2025. The Order instructs the U.S. Department of Labor (DOL) to take steps to facilitate the inclusion of investments in alternative assets in employee benefit plans. The Order acknowledges the problem that “burdensome lawsuits” have posed to expanding plan participants’ access to alternative assets. It is notable, however, that the Order does not explicitly spell out any specific solutions for the threat of litigation that plan sponsors and fiduciary committees face under the Employment Retirement Income Security Act of 1974 (ERISA). Absent litigation reform, the DOL’s development of a safe harbor or other regulatory measures, plan sponsors and fund managers arguably lack adequate protections from frivolous ERISA litigation to confidently move forward with making investments in alternative assets available to plan participants. This second article in a two-part series delves into the ERISA litigation risks that could result from including alternative assets in employee benefit plans, as well as certain factors that could reduce that risk. The first article summarized the Order; contextualized past DOL guidance; offered relevant considerations that fund managers and plan sponsors should weigh; and considered the likelihood of immediate action. See “Inherent Obstacles and Promising Pathways to Retailization in the PE Industry” (May 29, 2025).

SEC Signals Continued Willingness to Pursue Technical Violations With No Apparent Investor Harm

On September 4, 2025, the SEC announced that it had settled charges (Order) against an investment adviser whose clients are primarily individuals. The Order enumerated several violations of the Investment Advisers Act of 1940 (Advisers Act) relating to marketing; recordkeeping; implementation of compliance policies and procedures; and annual compliance reviews. Specifically, the misconduct involved violative statements in advertisements appearing on the firm’s public website, as well as the failure to retain archived versions of the site. Despite the SEC’s focus under Chair Paul S. Atkins on actual fraud and investor harm, the Order is a reminder that the SEC will still pursue enforcement efforts for technical breaches of compliance obligations even when there is no apparent harm to investors. This article summarizes the Order and provides further insights from industry experts about proper industry practices to comply with the substantiation requirements under Rule 206(4)‑1 of the Advisers Act and to properly retain archived versions of firms’ websites. For coverage of other recent SEC enforcement actions under Atkins, see “SEC Fines Sponsor for Overcharging PE Funds Via Improperly Applied Management Fee Offsets” (Oct. 2, 2025); and “SEC Enforcement Action Raises Potential Materiality Threshold for Conflicts of Interest” (Jul. 24, 2025).

Tax Issues and Complications for Non‑U.S. Investors in Private Credit Funds (Part One of Two)

Although private credit is an established global asset class with strong annual growth, U.S. fund managers must still tread carefully before onboarding non‑U.S. investors. An improperly structured private credit fund can expose non‑U.S. investors to taxes from income effectively connected (ECI) to a trade or business (e.g., loan origination) in the U.S., along with resulting U.S. tax filing obligations. It is hardly a straightforward problem, however, as sponsors must weigh several factors when deciding how to operate their private credit strategy to both optimize gains and limit tax exposure. Those issues were addressed in a program hosted by Strafford CLE Webinars, featuring Proskauer partners Christine Harlow and Janicelynn Asamoto Park, that analyzed tax risks for non‑U.S. investors in U.S. private credit funds. This first article in a two-part series describes the ECI risks faced by non‑U.S. investors and the challenges with conducting a private credit strategy without operating as a trade or business in the U.S. The second article will discuss the challenges of using hybrid funds for private credit strategies and detail several fund structures that can mitigate potential tax harm. See our two-part series: “Notable Tax Provisions and Circumstances to Weigh to Optimize Treatment of Non‑U.S. and Tax Sensitive Investors” (Jun. 28, 2022); and “Ways That Tax Concerns Drive Structuring Strategies for PE, Real Estate and Private Credit Funds” (Jul. 12, 2022).

Division of Investment Management Staff Discuss Staffing, Operations, Rulemaking and Other Developments

The Trump administration has implemented broad staffing reductions across the entire government – including the SEC – and promised a lighter regulatory touch. The rapid changes prompted by Trump’s executive orders and the so-called Department of Government Efficiency have led to considerable uncertainty as to how the SEC will approach and implement those mandates. At PLI’s SEC Speaks 2025 event, officials from the Disclosure Review, Rulemaking, Analytics and Chief Counsel’s Offices of the SEC Division of Investment Management (Division) discussed the current operations of the Division; highlighted the functions and importance of their respective offices; and described recent regulatory activities. The speakers provided their remarks in their official capacities, but the views expressed were not necessarily those of the SEC, its commissioners or other SEC staff members. This article synthesizes the speakers’ insights, focusing on the issues most relevant to private fund managers. See “SEC Examinations Staff Shine a Light on How Registrants Are Selected and Ways to Excel During an Exam” (Jul. 10, 2025).

New Hire Strengthens Alston & Bird’s Private Credit and Fund Finance Expertise

Emily Stephens has joined Alston & Bird as a partner in the firm’s Los Angeles office. Her arrival expands the firm’s investment funds, fund finance and private credit offerings. For insights from Alston & Bird, see our two-part series on retail distribution platforms: “Growing Popularity, Numerous Benefits and Operational Obstacles” (Sep. 4, 2025); and “Selection Criteria, Due Diligence Processes and Potential Pitfalls” (Sep. 18, 2025).

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