Happily Ever After? – Investment Funds that Live with ERISA, for Better and for Worse
ERISA Fiduciary Law - Second Edition, 2016 Supplement, S. Serota, A. Oringer, eds., BNA Books, 2016
New York University Review of Employee Benefits and Executive Compensation, A. Lurie, ed., 2012
42 Pages Posted: 27 Jan 2012 Last revised: 21 Jul 2018
Date Written: March 31, 2016
ERISA can be extremely complex at times, sometimes even seeming to operate counterintuitively in an attempt to achieve its protective goals. There may have been a time when various investment professionals commonly disdained taking investment from pension plans subject to ERISA. Only as investment capital has become increasingly concentrated in pension plans have investment professionals more broadly realized that dealing with ERISA might be necessary or even preferable. At the same time, various collective, commingled and other pooled investment strategies have proliferated and have become increasingly entrenched in the market. An emerging trend has developed for multiple layers of collective investing, often with the use of a “fund of funds” to invest in still other downstream collective vehicles. The rise of collective investing, together with a greater appreciation of the value of managing ERISA plan assets, has prompted managers to accept ERISA plan investments even if ERISA-related compliance obligations would be triggered. These trends focus attention on how the various rules under ERISA are brought to bear when a fund is deemed under the so-called “plan assets” regulation of the U.S. Department of Labor and ERISA Section 3(42). This discussion will address the particular application of ERISA’s fiduciary rules to multi-investor funds actively managed by a third-party registered investment adviser operated from the outset to hold plan assets and thereby be subject to ERISA.
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