ERISA in Private Equity Fund Investment Negotiation


Employee benefit plans subject to the Employee Retirement Income Security Act (ERISA) 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 (the Code) to doing so, in evaluating whether to make such an investment, the responsible fiduciary for the plan will need to take into account a number of considerations relating directly to its statutory responsibilities relating to investment management and the nature of the fund or investment as well as to document its decision-making process. This practice note addresses several key tasks and issues for ERISA fiduciaries considering investing plan assets in alternative investments and discusses the current landscape of the Department of Labor's views on environmental-social-governance (ESG) investing and the exercise of voting rights in the ERISA context.