The Department of Labor’s Office of Inspector General recently issued a report detailing concerns with the valuation of alternative investments (such as private equity funds, hedge funds, and real estate) held by ERISA plans. ERISA requires plan sponsors and fiduciaries to value investments for several purposes, including to determine funding obligations, select investments, monitor investment performance, and file accurate financial statements. The report notes that many plan fiduciaries rely on valuations provided by managers of alternative investments without analyzing the basis for the valuation or seeking independent review. The report suggests that this practice poses substantial risks to the retirement system and urges the Labor Department to require more rigorous valuation methodology.
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