A major new Wharton study documents how private-equity-owned insurers favor affiliated investments, pay higher prices, delay recognizing losses, and expose policyholders to greater risks. The danger does not stop with private equity. Traditional insurers must compete with this model, potentially pushing the entire industry toward riskier investments. Congress needs a federal insurance regulator before the next insurance crisis.

By Christopher B. Tobe, CFA, CAIA
The CommonSense 401k Project | October 2026

Wharton Has Done What Insurance Regulators Should Have Done Years Ago

A remarkable new 2026 paper from the Wharton School at the University of Pennsylvania provides some of the strongest empirical evidence yet that private-equity ownership is changing the risks borne by American annuity holders.

The paper, “Buying from the Family: Private Equity-Owned Insurers and Their Affiliated Investments,” by Amy W. Huber, Stefan Huber, Bella Shan, and Christina Zhu, examines what happens when the same financial conglomerate controls both an insurance company and the businesses originating the investments that insurer purchases.

The findings should alarm retirement-plan fiduciaries, pensioners, insurance regulators, and members of Congress.

The researchers used detailed statutory insurance filings, security-level transaction records, ownership structures, independent valuations, and NAIC stress tests. They did not merely speculate about conflicts of interest. They examined how affiliated transactions actually differ from arm’s-length investments.

Their findings challenge the comforting insurance-industry narrative that investment-grade ratings, state regulation, and statutory reserves adequately protect annuity holders.

The evidence suggests something much more troubling: insurance companies can become captive financing vehicles for the investment businesses of their owners, while policyholders bear the consequences.

And there is an even bigger problem that deserves attention.

Once private-equity-owned insurers gain a competitive advantage from investing in higher-yielding, less-transparent private assets, what happens to traditional insurers that must compete against them?

They face pressure to follow.

That is how a problem concentrated in private-equity-owned insurance companies can become an industry-wide threat.

The Wharton Findings: Follow the Policyholders’ Money

The numbers are extraordinary.

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Wharton finding	Result
Assets of directly PE-owned insurers in 2024	$696 billion
Share of new PE-owned insurer investments going into structured securities	Over 40%
Share of those structured-security acquisitions issued by affiliates in 2024	Over 60%
Price premium on affiliated private securities in estimated primary-market transactions	47 basis points
Additional modeled capital loss in a 2008-like stress scenario	Approximately 4 percentage points
Average equity buffer relative to fixed-income portfolios	7.6%

Source: Huber, Huber, Shan and Zhu, September 2026, pp. 1–5, 20 and 27–28.

The authors find that directly PE-owned insurers allocate approximately twice as much of their new investment capital to structured securities as independent insurers.

More importantly, the majority of those structured-security purchases are issued by companies affiliated with the same private-equity owner.

This is not simply an insurer purchasing a diversified collection of independently originated investments.

It is a financial organization originating investments and then using an insurance company under common ownership to help finance them.

The traditional discipline of independent buyers negotiating prices, rejecting unattractive investments, and selling deteriorating assets can be weakened when the buyer and seller ultimately answer to the same financial conglomerate.

Wharton finds affiliated insurers pay more for the same investments

One of the study’s most revealing findings concerns pricing.

When comparing purchases of the same security on the same day, the researchers find that PE-owned insurers pay higher prices when buying from affiliated issuers.

For privately placed securities classified as primary-market transactions, the estimated premium is approximately 47 basis points of par value.

That is an especially powerful finding because the comparison controls for the security and transaction date.

The higher price benefits the affiliated issuer receiving financing.

But who bears the economic cost of the insurer paying more?

The insurance company does, and ultimately its financial strength supports the promises made to policyholders.

Wharton finds insurers are less willing to recognize deterioration in affiliated investments

The second finding is potentially even more troubling.

When affiliated investments fall below their historical cost, PE-owned insurers are less likely to recognize impairments and less inclined to sell those positions than their other investment holdings.

The researchers find that PE ownership offsets approximately 80% of the increased same-year impairment propensity otherwise associated with affiliated holdings.

This raises a basic question.

Is the insurer making investment decisions for policyholders, or is it protecting the financing needs and reported performance of affiliated investment businesses?

This pattern is consistent with affiliated insurers providing financial support when an independent investor might recognize a loss or exit.

And the researchers do not find that this favorable treatment is rewarded with superior investment performance.

Securities attracting greater affiliated PE-owned insurer investment have lower independent fair-value estimates beginning two years after purchase.

The supposed advantages of affiliated investing are not producing better results in the study’s comparisons.

The Most Frightening Number: Four Percentage Points of Additional Capital Loss

Wharton’s stress-test analysis should attract particular attention from insurance regulators.

Using NAIC CLO stress-test results and extending the findings to the broader structured-security portfolios of PE-owned insurers, the researchers estimate approximately four percentage points of additional portfolio losses under a severe financial-crisis scenario.

That compares with an average equity buffer equal to 7.6% of fixed-income investments.

In other words, the estimated additional losses alone could consume more than half that measured equity buffer.

The estimate extrapolates from stress-tested broadly syndicated CLOs to other structured securities whose stress performance cannot be directly observed.

But that limitation actually exposes another regulatory weakness: many of the private securities that deserve the closest examination are precisely those for which independent market prices and comparable stress data are most difficult to obtain.

If regulators cannot reliably measure the risk of the assets, why should policyholders accept assurances that statutory capital is adequate?

The Next Domino: Traditional Insurers May Be Forced to Take More Risk

Here is where I would take the Wharton findings a step further.

The paper concentrates on insurers directly owned by private-equity firms.

But competition does not stop at corporate ownership boundaries.

Imagine two insurers competing for the same $1 billion pension risk transfer.

One insurer benefits from an affiliated private-credit origination business. It can purchase complex, higher-yielding private securities and potentially benefit from favorable regulatory capital treatment.

The second insurer operates more traditionally, relying more heavily on liquid, publicly traded investment-grade bonds.

If the first insurer can generate higher expected portfolio yields, it may be able to offer the pension sponsor a lower premium while still targeting an attractive profit margin.

What does the second insurer do?

It can lose business, accept lower profits, or move toward investments offering higher yields.

This is the competitive contagion that could transform a private-equity insurance problem into an entire insurance-industry problem.

Traditional insurers do not have to be purchased by Apollo, Blackstone, KKR, or another private-equity manager to adopt similar investment strategies.

They can increase allocations to privately originated loans, commercial mortgages, structured credit, asset-backed securities, fund-finance arrangements, and privately rated investments.

They can hire private-credit managers or establish investment partnerships without changing the insurer’s ultimate ownership.

The incentive is straightforward: if higher portfolio yields permit lower PRT bids, more competitive annuity crediting rates, or larger retained investment spreads, competitors will feel pressure to participate.

Not every insurer will respond by taking more risk. Stronger capital standards, conservative management, and independent investment governance can resist that pressure.

But absent meaningful regulatory discipline, competition can reward the companies most willing to stretch their balance sheets.

That is a classic race-to-the-bottom problem.

And unlike ordinary corporate competition, the potential losers include pensioners who may depend on one insurance company’s promise for the rest of their lives.

Private Credit Can Look Short-Term on Paper While Remaining Illiquid for 15 Years

Another major concern is the way insurers measure asset/liability risk.

A privately originated commercial mortgage may have a contractual maturity of 15 years but reset its interest rate every three months.

Because of the floating rate, the asset can exhibit relatively low sensitivity to changes in benchmark interest rates.

But that does not mean the mortgage is liquid.

It does not mean the borrower can repay principal tomorrow.

It does not mean the insurer can sell the mortgage at book value during a financial crisis.

And it certainly does not mean that a private AA rating guarantees the existence of an active secondary market.

A three-month interest-rate reset does not turn a 15-year private mortgage into a three-month investment.

Yet the industry’s emphasis on interest-rate duration, ratings, and book-value accounting can obscure the distinction between interest-rate risk, credit risk, and liquidity risk.

An insurer can appear to have reasonably matched assets and liabilities while holding assets that cannot be converted into cash without substantial discounts.

The risk becomes especially serious when a policyholder, retirement plan, or regulator needs cash precisely because the insurer’s creditworthiness has deteriorated.

The Wharton paper reinforces this concern by finding that PE-owned insurers concentrate affiliated investments in securities that independent investors find more difficult to value.

It also identifies structures such as rated feeder funds and special-purpose vehicles that can transform private-fund exposure into securities receiving favorable regulatory capital treatment.

The question for Congress is simple:

Are regulatory ratings and capital formulas measuring the actual economic risks, or are financial engineers designing investments to satisfy the formulas?

Lincoln Shows Why This Is Not Just a Private Equity Problem

In my September 21 article, “Lincoln Says Its General Account Is ‘High Quality.’ The CDS Market Says Look Closer,”, I examined Lincoln Financial’s promotion of its general-account investment quality.

Lincoln reported approximately 96.8% investment-grade assets, while also disclosing substantial allocations to private credit, structured investments, and mortgages.

I compared Lincoln National’s five-year credit-default-swap spread of approximately 130 basis points in mid-September with Prudential’s approximately 80 basis points.

These are holding-company CDS quotations, not direct measures of the credit risk of the annuity-issuing subsidiaries. Nevertheless, they provide a market-based signal that deserves attention alongside statutory capital and insurer financial-strength ratings.

My criticism was not that Lincoln was insolvent (yet) but that its current ratings were somewhat contradicted by its higher credit default swap rates..

It was that calling an investment portfolio high quality does not adequately disclose the economic risk borne by a retirement plan holding a general-account fixed annuity.

The Wharton findings strengthen that concern.

Insurers should not be able to rely on favorable ratings and regulatory carrying values while withholding the information necessary to evaluate private-credit liquidity, asset maturity, valuation uncertainty, and stressed losses.

And the competitive pressure from PE-owned insurers may encourage even traditional carriers to increase those exposures.

Pension Risk Transfers: One Insurer Replaces a Diversified Pension Plan

The implications for pension risk transfers are particularly serious.

When a traditional defined-benefit pension plan purchases a group annuity to settle pension obligations, retirees move from a federally regulated pension arrangement into an insurance contract.

The transaction can remove PBGC protection and ERISA plan-level fiduciary oversight of the transferred benefits.

The insurer becomes the entity responsible for paying benefits, often for decades.

In my October 5 article, “AT&T’s Athene Pension Transfer: State Street Must Answer, but the Sponsor Gets Out,”, I discussed the fiduciary-accountability questions surrounding pension transfers to insurers.

The Wharton paper adds another reason why those questions matter.

What happens when the insurer receiving pension liabilities is part of a financial conglomerate that also originates and structures the assets purchased with policyholder-backed capital?

What happens when the insurer favors affiliated investments, pays more for them, and is reluctant to recognize deterioration?

And what happens when a traditional insurer competes for the same pension liabilities by increasing its own private-credit allocation?

The danger is not limited to whether the insurer can pay this year’s benefits.

A PRT annuity may require payments for 20, 30, or 40 years.

Fiduciaries should therefore evaluate the insurer’s ability to meet obligations through future credit cycles, not merely its current financial-strength rating.

The Diversification Lie: Thousands of Investments, One Insurance Promise

In “Annuity Derisking in Retirement Plans,”, I argued that retirement plans need to apply ordinary diversification principles to annuity credit risk.

A general-account insurer may own thousands of bonds, mortgages, and private loans.

But a 401(k) participant invested in its fixed annuity generally does not own those investments.

The participant owns a contractual claim dependent on one insurer’s ability to pay.

The insurer may be diversified internally, but the participant remains exposed to a single insurance company.

That is why I favor enforceable downgrade provisions permitting retirement plans to exit at book value when an insurer’s financial strength deteriorates.

A downgrade clause could allow a plan to transfer its money to another financially sound insurer before severe deterioration makes withdrawal difficult.

The absence of such protections can leave participants captive to the very insurer whose creditworthiness has become questionable.

The Wharton findings make these contractual protections more important, not less.

If insurers hold growing concentrations of illiquid private assets, fiduciaries must understand how they will exit when those assets are hardest to sell.

A downgrade clause is not a substitute for adequate capital or regulation. It is an additional protection that should be evaluated, priced, and disclosed.

Weak State Regulation Is Enabling a National Problem

The United States regulates insurance primarily through state governments.

The NAIC coordinates standards, but it is not a national insurance regulator with independent authority to enforce every model rule.

Meanwhile, the largest insurance and asset-management conglomerates operate nationally and internationally.

Their investment structures can involve Delaware insurers, Iowa-regulated entities, Bermuda reinsurers, Cayman Islands investment vehicles, Luxembourg funds, and affiliated asset managers.

In “Offshore in Your 401(k): Congress Must Require Wall Street to Show the Entire Chain,”, I called for disclosures identifying the entities that ultimately control retirement assets, where those entities are domiciled, how they are compensated, and what restrictions apply when investors want their money back.

The same principle should apply to annuity insurers.

If an insurer invests through a Bermuda or Cayman structure, federal regulators should be able to trace the investment to its underlying economic exposure.

If an insurer purchases securities originated by an affiliate, regulators should be able to determine whether the transaction occurred at arm’s length.

If an investment receives an AA rating from a smaller rating agency, regulators should be able to examine the methodology, conflicts, underlying collateral, and actual trading evidence.

And if an insurer transfers liabilities to an offshore reinsurer, federal regulators should be able to evaluate the entire transaction, including the assets and capital supporting the obligations.

Financial conglomerates operate across state and national borders. Regulatory accountability should not stop at those borders.

Congress Has Already Been Warned

In my September 25 article, “Congress Finally Asks Whether America Needs a Federal Insurance Regulator. The Answer Is Yes,”, I discussed the Congressional Research Service’s examination of private investments and insurance companies.

CRS reported approximately $849 billion in private-credit holdings among life insurers in 2024 and identified concerns involving private ratings, affiliated investments, offshore reinsurance, and regulatory arbitrage.

Those numbers are not limited to directly PE-owned insurers.

The Wharton paper now provides additional evidence of why these issues deserve federal attention.

State regulators are supervising companies whose investment decisions can affect national retirement markets and potentially transmit losses into broader credit markets.

The authors explicitly identify the possibility that losses on affiliated investments could force insurers to sell other securities to restore capital, spreading stress beyond the original private-credit investments.

That is systemic risk.

It cannot be adequately addressed merely by reviewing whether each individual insurer satisfied its state’s statutory capital formula at year-end.

The financial system is interconnected. The regulatory response must recognize those connections.

Elizabeth Warren Is Asking Questions Congress Should Have Asked Years Ago

In “Elizabeth Warren May Be the Insurance Industry’s Only Real Watchdog — and a CFPB-Style Federal Regulator Is Its Worst Nightmare,”, I argued that federal lawmakers need to challenge the insurance industry’s longstanding reliance on state supervision.

Senator Warren’s scrutiny of private-equity-linked insurers reflects a larger issue that should concern both political parties.

Americans depend on annuity contracts for retirement security.

Those promises should not depend on whether a small state insurance department has sufficient resources, independence, or expertise to examine a global private-credit conglomerate.

Congress should establish a national insurance regulator with genuine investigative, supervisory, and enforcement authority.

A CFPB-style model would put the interests of policyholders at the center, but the agency would also need powers the current CFPB does not possess: prudential supervision, capital and liquidity examinations, and oversight of insurance holding-company groups.

The goal should not be to replace every state insurance function.

It should be to establish enforceable national protections against risks that state-by-state regulation cannot adequately control.

Seven Federal Reforms Congress Should Enact

1. Require full transparency of private-credit and affiliated investments.

Large insurers should disclose private-credit exposures, affiliated transactions, underlying asset classes, valuation methods, ratings providers, contractual maturities, and liquidity characteristics in standardized, comparable formats.

2. Require independent valuations of affiliated investments.

Affiliated assets should receive independent valuation scrutiny, especially when they are privately placed, difficult to trade, or purchased from related entities. Regulators should compare carrying values with credible market-based exit values.

3. Establish meaningful federal capital standards for private-credit risk.

Regulatory capital should reflect credit risk, concentration, valuation uncertainty, and liquidity. A privately rated AA security should not automatically receive favorable treatment when its underlying risk cannot be independently verified.

4. Require separate disclosure of interest-rate duration, credit-spread duration, and contractual maturity.

Insurers should not be permitted to use short floating-rate reset periods as a substitute for disclosing long-term principal exposure.

A 15-year private mortgage with a quarterly reset should be reported as exactly that.

5. Conduct federal systemic liquidity stress tests.

Regulators should test what happens when multiple insurers simultaneously experience private-credit losses, rating downgrades, reduced new premiums, and demands for cash.

The stress tests should include the possibility that several insurers attempt to sell similar illiquid assets at the same time.

6. Strengthen retirement-annuity protections.

For ERISA fixed annuities and PRT contracts, Congress should require clear disclosure of insurer credit and liquidity risks, meaningful comparisons among insurers, and competitive evaluation of enforceable downgrade protections.

For PRTs, fiduciaries should obtain competitive bids that explicitly price additional credit protections rather than assume such protections are unavailable.

7. Establish a federal insurance regulator with authority over entire financial groups.

A federal watchdog must be able to examine insurers, affiliated asset managers, reinsurers, and investment structures across state and offshore jurisdictions.

It must also have the authority to intervene before liquidity problems become insolvencies.

Disclosure without enforcement is not enough.

The Entire Industry Is Being Pulled Toward Greater Risk

The Wharton authors deserve enormous credit for bringing hard evidence to a debate too often dominated by insurance-company marketing and reassuring credit ratings.

Their research demonstrates that PE-owned insurers systematically behave differently when investing in affiliated securities.

They buy more structured credit, concentrate purchases among affiliates, pay higher prices in certain transactions, and are less inclined to recognize or exit deteriorating affiliated investments.

Their stress analysis indicates that the resulting downside exposure could be substantial relative to insurer capital.

But the greatest long-term danger may be what happens outside private equity.

When some insurers generate higher investment yields by accepting greater private-credit complexity, opacity, and illiquidity, competitors face pressure to do the same.

Traditional insurers may increasingly adopt the same investment strategies even without being acquired by private-equity firms.

The result could be an industry in which higher private-credit exposure becomes the competitive norm.

This is precisely why relying on state regulators, private credit ratings, and year-end statutory accounting is insufficient.

The financial crisis will not wait for regulators to discover that a portfolio with a short reported interest-rate duration contains 15-year loans that cannot be sold.

And retirees should not have to discover that their supposedly safe annuity is backed by investments whose risks were poorly measured, privately rated, or hidden inside affiliated structures.

The Wharton paper should become required reading for Congress, the NAIC, state insurance commissioners, pension fiduciaries, and every retirement consultant recommending annuities.

It provides evidence that the existing system deserves far more scrutiny.

Congress must now confront the broader question: If competition is pushing the entire annuity industry toward increasingly opaque and illiquid private credit, who is protecting the retirees who ultimately bear the risk?

The answer cannot remain 50 state insurance departments acting separately.

America needs federal insurance regulation, transparent private-credit accounting, credible systemic stress testing, and enforceable protections for annuity holders — before the next insurance crisis, not after.

APPENDIX

Remember AIG: A Highly Rated Insurance Giant Needed an $85 Billion Rescue

The Wharton study’s 2008-style stress test should remind Congress of something the insurance industry would prefer to forget: AIG.

In early 2005, AIG held an AAA credit rating from Standard & Poor’s. By September 2008, after successive downgrades, it was rated A− and required an emergency $85 billion Federal Reserve rescue to avert a potentially catastrophic failure.

AIG did not have to be rated junk before its liquidity crisis became overwhelming.

Its problems involved deteriorating mortgage-related securities, derivatives collateral calls, securities lending, and an inability to raise cash when counterparties lost confidence.

On September 15, 2008, rating downgrades generated more than $20 billion of additional collateral and termination-payment requirements over a short period.

The federal government intervened the next day.

Now consider what the Wharton researchers have found about today’s private-equity-owned insurers.

Their analysis of NAIC stress tests shows that additional losses associated with affiliated investments are largely invisible in moderate scenarios but become substantial under financial-crisis conditions.

Their estimated additional portfolio loss of approximately four percentage points would consume more than half the measured equity buffer of the PE-owned insurers in their sample.

And those losses are additional to the baseline stress losses.

The study does not predict another AIG. It documents a potential source of severe downside exposure that deserves much more scrutiny.

AIG demonstrated how rapidly investment losses, ratings downgrades, collateral requirements, and disappearing liquidity can interact.

Wharton demonstrates that today’s affiliated private-credit investments may contain risks that become visible only under severe stress.

Congress should not wait until another highly rated insurance conglomerate needs emergency federal support to discover that state regulation, favorable ratings, and statutory accounting failed to capture the full risk.

The lesson of 2008 is not that every insurer will fail. It is that even a large, highly rated financial institution can become a systemic threat when opaque credit exposures and liquidity obligations interact.

America needs federal insurance stress testing that measures not only investment losses, but also the cash insurers must produce when confidence disappears.

“Do not put all your eggs in the same basket,” or diversification, is one of the most important investment principles.  Many annuities used in retirement plans such as fixed, index, and lifetime annuities in 401k type plans, have single-entity credit and liquidity risk.   Many plans avoid annuities, but for those who do the risk could be mitigated by downgrade clauses or purchasing credit default swaps. 

Harry Markowitz’s landmark 1952 paper, “Portfolio Selection,” established the foundation of modern portfolio theory: portfolio risk depends on how investments move together, as well as the risks of individual holdings. Combining investments with imperfectly correlated returns can reduce portfolio risk. Merely accumulating more securities offers less protection when they share the same underlying vulnerabilities. traders.berkeley.edu

ERISA §404(a)(1)(C) requires fiduciaries to diversify plan investments to minimize the risk of large losses, unless circumstances make foregoing diversification clearly prudent.

For fixed income investors, that principle has a practical application: spread exposure across independent issuers so that one company’s financial trouble cannot devastate the portfolio.

An annuity issued by a single insurer can concentrate participants’ retirement savings in one company’s ability to honor its promises. Executive Life’s failure and AIG’s need for an extraordinary federal rescue demonstrate why an insurance guarantee cannot substitute for evaluating credit and liquidity risk. Insurer distress could expose participants to payment delays, withdrawal restrictions, and/or losses. Plan fiduciaries who fail to prudently evaluate and monitor that concentration, assess exit rights, and document the justification for accepting the risk can increase their exposure to ERISA liability for resulting losses.

A downgrade clause would give a retirement plan a practical way to reduce single-insurer risk when the insurer’s financial strength deteriorates. For example, a plan could require an insurer to meet a specified AA financial-strength rating at purchase, with an enforceable right to withdraw the full contract value—including accrued interest—if its rating falls to A. The plan could then transfer the proceeds to another insurer meeting its AA standard, following appropriate due diligence. The principle is straightforward: participants should not become captive creditors of a weakening insurer because leaving would trigger a financial penalty.   Downgrade clauses are not regularly offered in annuities because they are lest profitable to the insurer.     The difference in costs or yield so annuities with and without downgrade clauses could be used as a way to measure risk related damages.

Credit default swaps offer another potential way to reduce an annuity’s single-insurer credit risk. A $100 million Lincoln fixed-annuity allocation illustrates why single-insurer risk should receive a dollar valuation. Applying the historical 97.8-basis-point Lincoln CDS spread reported for September 2025 produces an annual credit-protection cost equivalent of $978,000—approximately $4.89 million over five years before adjustments. That figure is a starting point for valuing the exposure participants bear. A damages estimate would refine it for the actual annuity issuer and contract, subtract the residual risk of the prudent alternative, and credit any additional compensation participants received. The absence of an insurer failure does not make the exposure economically worthless; it means the analysis must value the contractual risk rather than simply count unpaid benefits.

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AT&T’s Athene Pension Transfer: State Street Must Answer—But the Sponsor Gets Out

Congress Finally Asks Whether America Needs a Federal Insurance Regulator. The Answer Is Yes.

Lincoln Says Its General Account Is “High Quality.” The CDS Market Says Look Closer

Lifetime Income Annuities Need Downgrade Clauses to Work in 401(k)s

Annuity Risk measured by Credit Default Swaps (CDS)

No one in Kentucky’s current election cycle has received more donations from the Epstein class.  

There is no more serious connection to Epstein than Apollo and its founder/CEO Leon Black.   From his conviction in 2008 to his death in 2019 Leon Black provided Epstein with over $158 million for “tax advice”, despite Epstein having no qualifications in that area.  There are over 8000 mentions of Black in the Epstein Files.  Current Apollo CEO Marc Rowan is also prominently featured in the Epstein files.   Barr has accepted at least $37,500 from Apollo in 2025-26.

Howard Lutnick of Cantor Fitzgerald current Commerce Secretary, and Epstein neighbor sons and firm gave $8,500 to Barr.   Lutnick lied about visiting Epstein Island in 2012 claiming he cut ties in 2005.

Stephen Schwatzman of Blackstone has only 179 mentions in the Epstein file.  Blackstone has given Barr over $83 thousand.

Jes Daly of JP Morgan, which has given Barr over $25 thousand had extensive relationship with Jeffrey Epstein.

Andy Barr will be a proud protector of the Epstein class and the receipts prove it. 

Kentucky Epstein Connections – Alvarado accuses Dembo, but has many of his own.

Kentucky Epstein Connections – James Comer had a unique role in hiding Epstein Files

Many in Congress get donations from firms linked to Jeffrey Epstein – KY Congressman Andy Barr Example

Kentucky Epstein Justice May Update

Comer should welcome every effective avenue for obtaining evidence. Instead, Comer publicly argued against the need for the very mechanism that ultimately helped produce the Epstein Files Transparency Act.

Comer eventually voted for that legislation when it passed the House 427–1 on November 18, 2025. That vote belongs in the record. It does not erase his earlier effort to persuade Americans that the pressure campaign was unnecessary.

A document dump is not the same as disclosure

Comer’s committee released more than 33,000 pages in September 2025. The number sounded impressive. But committee Democrats said approximately 97% of the material was already public. Louisville Public Media reported that the release largely contained information already known—and that the White House supported Comer’s process while fiercely attacking Massie’s effort.

When CNN confronted Comer with the 97% criticism, he pivoted to a comparison with Joe Biden and praised Trump’s cooperation.

That response exposed the political problem. Survivors needed an accounting of missing evidence. Comer offered a partisan comparison.

The proper measure of transparency is whether previously concealed evidence becomes available, whether withholding is justified and whether the public can determine what remains missing. Recycling thousands of pages cannot substitute for answering those questions.

Follow the money—after another delay

The financial records were central to understanding how Epstein operated.

On September 8, 2025, Comer’s committee promised to pursue additional bank records. On October 31, Khanna and other committee Democrats wrote to Comer pointing out that 53 days had passed without bank-record subpoenas being issued. Their letter demanded action and included a proposed document schedule covering financial transactions, communications and due diligence.

Comer subsequently subpoenaed JPMorgan Chase and Deutsche Bank on November 18. That was necessary investigative work. It also came more than two months after the committee publicly promised to pursue those records.

For anyone concerned about Wall Street’s role, that delay deserves scrutiny. Financial evidence should have been a priority from the outset.

The chairman repeatedly stepped into Trump’s defense

On August 18, 2025, Comer publicly praised the administration’s commitment to transparency as DOJ prepared to begin producing records.

On September 8, his official statement accused Democrats of politicizing the estate’s documents and emphasized that Trump was not accused of wrongdoing.

An investigator must distinguish evidence from insinuation. But the chairman’s job is to establish the facts wherever they lead. Repeatedly making the president’s political defense part of the committee’s message undermines confidence in that independence.

The committee’s own November release went further, describing testimony as having defeated Democrats’ allegations against Trump. The public-facing emphasis was unmistakable: protecting the president’s reputation had become part of the investigation’s presentation.

Massie and Khanna kept demanding enforcement

By January 2026, Massie and Khanna were asking a federal judge to appoint an independent monitor. They alleged missed deadlines, improper withholding and excessive redactions, alongside failures to protect survivors’ information.

In July, they introduced the Epstein Files Transparency Act II to provide additional avenues for challenging DOJ noncompliance in court.

Their persistence illustrates why assurances from committee leadership were inadequate. A transparency promise needs enforceable consequences.

Comer also took substantive steps that deserve acknowledgment. He subpoenaed banks and witnesses, issued a subpoena to Pam Bondi following a committee vote, and pursued Leon Black’s noncompliance. In September 2026, the House held Black in contempt after the committee unanimously recommended that action.

Those actions demonstrate that the committee possessed meaningful tools. They strengthen the case for demanding consistent, aggressive use of them.

The strongest case against Comer rests on his documented conduct: dismissing the need for the Massie–Khanna petition, defending the administration’s cooperation, delaying pursuit of banking evidence and repeatedly framing disclosures around Trump’s political defense.

Kentuckians should demand a public accounting of outstanding records, explanations for withheld material, equal treatment of witnesses and consequences for noncompliance.

Comer held the chairman’s gavel. He should be judged by how forcefully he used it to break secrecy—and by the occasions when he used his platform to tell Americans that the process they distrusted was working.

Kentucky Epstein Connections – Alvarado accuses Dembo, but has many of his own.

Cohan’s New Book on Jeffrey Epstein’s main funder Leon Black – Confirms the CalPERS Scandal Was Worse Than the Sanitized Version

Kentucky Epstein Connections – As far as Donors  – Andy Barr is clear winner

https://www.dropsitenews.com/p/ashley-moody-epstein-work-release-angie-nixon-florida-senate

Kentucky Epstein Connections – Alvarado accuses Dembo, but has many of his own.

Kentucky Epstein Connections – Alvarado accuses Dembo, but has many of his own.

In the 6^th District Congressional race Republican Ralph Alvarado accuses Democrat Zach Denbo of taking  Epstein related donations from Reid Hoffman of LinkedIN.   I applaud him for bringing out these facts.     I think it is important to point out Alvarado’s far more serious Epstein ties.

There is no more serious connection to Epstein than Apollo and its founder/CEO Leon Black.   From his conviction in 2008 to his death in 2019 Leon Black provided Epstein with over $158 million for “tax advice”, despite Epstein having no qualifications in that area.  There are over 8000 mentions of Black in the Epstein Files.  Current Apollo CEO Marc Rowan is also prominently featured in the Epstein files.   Apollo owned Lifepoint Health gave a $10,000 donation to Alvarado.

Alvarado received substantial funding from the MAGA Inc. Superpac, whose donors include many Epstein buddies and those broadly in the Epstein Class.   Howard Lutnick current Commerce Secretary, and Epstein neighbor gave MAGA Inc. $8.75mm and lied about visiting Epstein Island in 2012 claiming he cut ties in 2005.     Ron Lauder a $5mm donor to MAGA Inc. who is best known for pushing Trumps “Greenland” initiative  but files show that Epstein helped him establish an entity for him and Leon Black to jointly purchase a valuable painting which got 961 mentions in the Epstein files.   .  Stephen Schwatzman another $5mm MAGA donor has only 179 mentions in the Epstein file.   Marc Rowan of Apollo gave $1mm to MAGA as well.

Documents show Epstein helped establish an entity through which Lauder and Black jointly acquired a valuable painting

Cohan’s New Book on Jeffrey Epstein’s main funder Leon Black – Confirms the CalPERS Scandal Was Worse Than the Sanitized Version

As head of Kentucky Epstein Justice,  I want to look at every congressional race the US Senate Race and the Louisville Mayor Race for  Epstein related donations.   

6^th District Congressional race Ralph Alvarado accuses Denbo of taking     https://www.facebook.com/RalphAlvaradoMD/posts/we-now-know-who-has-been-paying-for-the-zach-dembo-for-congress-tv-attack-adsjef/1489849429632674/

We now know who has been paying for the Zach Dembo for Congress TV attack ads:

Jeffrey Epstein pal, billionaire Reid Hoffman gave $500K to the Dembo superPAC- almost half of the cash raised.

Hoffman once sent Epstein ice cream with a note that it was “for the girls”

So every time you see an ad meant to help Zach Dembo, it was probably paid for by the billionaire who sadistically sent ice cream to Jeffrey Epstein’s victims. Dembo wants power so bad he doesn’t care where the money came from.

This is dirty Epstein Class money fueling Zach Dembo’s campaign and it’s offensive that it’s taken this long for Kentucky to learn the truth.

Here is the first filing:

https://docquery.fec.gov/…/forms/C00958843/2023656/sa/ALL

In the 6^th District Congressional race, Republican Ralph Alvarado accuses Democrat Zach Dembo of taking Epstein-related donations from Reid Hoffman of LinkedIn.   I applaud him for bringing out these facts.     I think it is important to point out Alvarado’s far more serious Epstein ties.

No one has a more serious connection to Epstein than Apollo and its founder/CEO, Leon Black.   From his conviction in 2008 to his death in 2019 Leon Black provided Epstein with over $158 million for “tax advice”, despite Epstein having no qualifications in that area.  The Epstein Files contain over 8,000 mentions of Black.  Current Apollo CEO Marc Rowan is also prominently featured in the Epstein files.   Apollo-owned Lifepoint Health gave a $10,000 donation to Alvarado.

Alvarado received substantial funding from the MAGA Inc. Super PAC, whose donors include many Epstein buddies and those broadly in the Epstein Class.   Howard Lutnick, current Commerce Secretary and Epstein neighbor, gave MAGA Inc. $8.75mm and lied about visiting Epstein Island in 2012, claiming he cut ties in 2005.     Ron Lauder a $5mm donor to MAGA Inc. who is best known for pushing Trumps “Greenland” initiative  but files show that Epstein helped him establish an entity for him and Leon Black to jointly purchase a valuable painting which got 961 mentions in the Epstein files.    Stephen Schwatzman of Blackstone, another $5mm MAGA donor, has only 179 mentions in the Epstein file.   Marc Rowan of Apollo gave $1mm to MAGA as well.

*By Chris Tobe,  CFA, CAIA | The CommonSense 401k Project*

As Florida attorney general, Moody was one of just three trustees of the State Board of Administration, alongside the governor and chief financial officer. The Florida Retirement System Pension Plan held approximately $198 billion in June 2024, during her tenure. By June 2025, it held $211.5 billion.

New reporting from Drop Site News scrutinizes her office’s investigation into Jeffrey Epstein’s work-release arrangement and reports campaign contributions from people identified in Epstein-related records. The pension dimension makes the accountability question larger: some of the financial institutions connected to those records also had access to Florida workers’ retirement capital.

Apollo and Blackstone are the obvious starting points. They are not the end of the story.

Follow the pension relationships

The names extend to Carlyle cofounder David Rubenstein, Highbridge cofounder Glenn Dubin, Starwood founder Barry Sternlicht, former JPMorgan executive Jes Staley, JPMorgan asset and wealth management chief Mary Erdoes, KKR cofounder Henry Kravis, TPG cofounder David Bonderman, and Colony Capital founder Tom Barrack.

These connections differ. Some involve confirmed meetings, some extensive correspondence, some financial dealings, and some address-book entries.

The public deserves to know which managers received pension business, what trustees learned about their leadership, and how those facts affected investment oversight.

Carlyle: Rubenstein met Epstein after his conviction

David Rubenstein’s connection goes beyond a name appearing in somebody else’s conversation.

Released correspondence records a November 2012 meeting and an exchange afterward acknowledging it. Rubenstein’s spokesperson described a single, 20-minute meeting at Carlyle’s office about philanthropic proposals he did not pursue. The records also contain discussion of another possible meeting.

Florida’s pension report identifies Carlyle private equity, property, aviation and credit investments. One disclosed position alone—Carlyle Property Investors—was valued at approximately $363.4 million in June 2025.

A separate document, EFTA00665300, shows Boris Nikolic forwarding Epstein older fundraising correspondence headed “Materials at request of David Rubenstein.” It includes communications from Ryan Schwarz about a healthcare fund and its placement memorandum. That establishes that Carlyle-related materials reached Epstein through Nikolic.

The trustee question is straightforward: what did Florida examine about Carlyle’s leadership, controls and disclosures, and where is the written record?

Highbridge: Dubin adds a financial connection

Glenn Dubin cofounded Highbridge Capital Management. His relationship with Epstein involved both personal contact and financial dealings, including Epstein’s investments and reported involvement in Highbridge’s sale to JPMorgan.

Florida’s June 2025 report lists approximately $324.2 million in Highbridge Tactical Credit Fund and $25.6 million in Highbridge Convertible Dislocation Fund—roughly $349.8 million combined. Dubin left Highbridge in 2013.


Starwood: Sternlicht’s dinner was confirmed

Barry Sternlicht’s spokesperson confirmed that the Starwood founder attended an August 2018 dinner at Epstein’s Manhattan home—approximately a decade after Epstein’s conviction.

The spokesperson said Sternlicht attended at Peter Attia’s urging, wanted to meet Woody Allen and Kathryn Ruemmler, left early, and never subsequently saw or spoke to Epstein. A separate purported 2013 meeting was disputed.

Florida’s pension report lists several Starwood real estate funds.


JPMorgan: the governance issue has an established regulatory record

Jes Staley headed JPMorgan’s asset-management business from 2001 through 2009. Florida has a documented history of investing with JPMorgan, and its more recent report lists multiple JPMorgan property funds.

Staley’s Epstein relationship was extensive. The UK Upper Tribunal upheld his regulatory ban after he approved misleading statements about the nature and timing of that relationship.

That is a concrete finding about integrity in financial leadership. Pension trustees should care deeply about it.

Mary Erdoes also belongs in the examination. Reporting documents meetings with Epstein in 2011 and 2013. Other bankers identified in reporting include John Duffy and Justin Nelson. JPMorgan said the interactions involved ordinary client matters, litigation or client introductions, and denied knowledge of Epstein’s crimes.

Erdoes’s relevance to institutional investors is particularly direct because she leads asset and wealth management.

KKR, TPG and Colony broaden the inquiry

Henry Kravis appears in Epstein’s address book, according to William Cohan’s reporting. Florida reports investments in KKR Asian funds. That establishes an address-book overlap with the cofounder of a pension manager.

David Bonderman, TPG’s cofounder, appears in Epstein’s earlier address book, investigated by Business Insider. Florida reports TPG Growth fund holdings.
Tom Barrack’s connection is more substantial. Released records document years of correspondence with Epstein after his conviction. Florida’s December 2016 schedule listed $375 million in commitments across three Colony distressed-credit funds. Its June 2024 schedule still reported approximately $44.9 million in combined remaining value in those funds.


California already demonstrated the danger of weak pension oversight

The CalPERS placement-agent scandal involved Apollo-managed investments, fraudulent disclosure letters and concealed financial relationships. Former CalPERS CEO Fred Buenrostro pleaded guilty and received a 54-month prison sentence. A Trustee committed suicide.

It is also highly likely that Florida used brokerage firm Cantor Fitzgerald owned by Howard Lutnick, but was not disclosed.

Ashley Moodys ties to the Epstein class disqualifies her for Senate.

## Sources

– [Drop Site News: Moody investigation and campaign donors](https://www.dropsitenews.com/p/ashley-moody-epstein-work-release-angie-nixon-florida-senate)
– [Florida SBA 2024–25 Annual Investment Report](https://www.sbafla.com/media/ucznhyvg/2024-2025-air-final.pdf)
– [Florida FRS 2024–25 ACFR, brokerage schedule at printed page 118](https://frs.fl.gov/forms/2024-25_ACFR.pdf)
– [Front Office Sports: Rubenstein meeting and response](https://frontofficesports.com/article/orioles-david-rubenstein-jeffrey-epstein/)
– [Epstein document EFTA00665300, searchable transcription](https://yirah.fi/epstein/en/document/EFTA00665300)
– [Miami New Times: Sternlicht dinner and response](https://www.miaminewtimes.com/news/miami-beach-billionaire-barry-sternlicht-dined-at-epsteins-home-in-2018-40524427/)
– [Reuters: Dubin’s retirement and 2013 Highbridge departure](https://www.investing.com/news/stock-market-news/exclusive-hedge-fund-billionaire-glenn-dubin-retires-from-industry-after-40-years-2067450)
– [Vanity Fair: Dubin’s Epstein relationship and denials](https://www.vanityfair.com/news/2019/09/glenn-dubin-epstein-questions)
– [FCA: Upper Tribunal upholds Staley ban](https://www.fca.org.uk/news/press-releases/upper-tribunal-upholds-jes-staley-ban)
– [Reuters: JPMorgan bankers’ meetings and bank response](https://www.reuters.com/world/us/jpmorgan-bankers-met-with-epstein-after-his-accounts-were-closed-wsj-2023-04-21/)
– [Vanity Fair: Kravis address-book entry](https://www.vanityfair.com/news/2019/07/jeffrey-epsteins-financial-black-book)

By Christopher Tobe, CFA, CAIA

Kentucky’s public pensions need a comprehensive investigation of excessive investment fees. They also need to make sure the investigation does not become another way for Wall Street to profit from pension secrecy.  Especially putting this into the hands of Apollo with its extensive connections to Jeffrey Epstein.

I have publicly estimated that CERS and related pension plans administered by the Kentucky Public Pensions Authority are burdened with more than $200 million a year in excessive fees, primarily associated with private equity firms operating through secret, no-bid contracts.

Now CERS has hired XTP Implementation Services to examine investment contracts and share in the savings.

Recovering pension money sounds attractive. But the ownership relationships behind the investigator raise an unavoidable question:

Could Kentucky’s fee investigation become a tool for selectively pressuring some private equity firms while protecting others?

The public deserves an answer before a savings announcement becomes an excuse to stop asking questions.

The 50% bounty is real

In his September 14, 2026, report to the CERS board, CEO Ed Owens announced that CERS had finalized its agreement with XTP. The assignment includes reviewing existing investment manager and contractual service agreements for compliance. CERS and XTP will split savings equally for the first two years; subsequent savings belong entirely to the trust.

That is a substantial financial incentive.

For illustration, $20 million in qualifying savings during the sharing period would mean $10 million for XTP. Whether that price is reasonable depends on the work performed, the alternatives available, and precisely how “savings” are calculated.

The board memorandum establishes a two-year sharing period. It does not establish that the bounty continues forever. Nor does that summary tell us whether there is a dollar cap, how recoveries are distinguished from future discounts, or who independently verifies the calculation.

Publish the executed contract. Kentucky should not need another secret agreement to investigate the costs of existing secret agreements.

Follow the ownership chain

Wilshire acquired XTP in August 2024. Wilshire itself was acquired by CC Capital and Motive Partners in January 2021. Later in 2021, Apollo announced a strategic partnership that included acquiring up to a 24.9% minority interest in Motive’s management company and investing through Motive-managed vehicles.

Gretchen Morgenson’s May 2026 reporting on the CalPERS investigation highlighted the Apollo–Motive–Wilshire connection. My accompanying CalPERS analysis examined the broader history of Apollo’s relationship with the pension fund.

Kentucky trustees should demand a current ownership chart, economic-interest disclosures, and an explanation of every party’s governance and information rights.

“Independent” should describe enforceable protections, not simply appear in the sales presentation.

Selective scrutiny could turn oversight into a competitive weapon

Consider how this arrangement could be misused.

An investigator examines one private equity manager aggressively, demands extensive documentation, challenges expense allocations and presses for concessions. Another manager receives a narrower review. A third is deferred.

Even when all contracts are nominally within scope, the depth, timing and consequences of scrutiny can differ dramatically.

If Apollo competitors received aggressive treatment while Apollo-related interests received favorable treatment, Kentucky’s pension oversight could become a competitive weapon.

A targeted firm might face pressure to make concessions while a connected competitor preserved its economics. A few visible savings could then provide political cover for leaving much larger costs untouched.

Who decides which fees deserve a fight?

A percentage-of-savings arrangement rewards recoveries that qualify for compensation. It does not automatically reward a complete accounting of every excessive cost.

An investigator could pursue easy discounts, avoid difficult managers, and produce a profitable engagement without confronting the largest problems.

A pension board could announce millions saved while leaving the basic system of secret contracts untouched.

The public therefore needs to see more than a total savings figure. It needs a manager-by-manager accounting of what was examined, what was challenged, what was recovered and what remains unresolved.

Every exclusion should have a written explanation. Every refusal to provide records should reach the trustees. Every material finding should survive the end of a negotiation.

A manager’s willingness to offer a discount must not buy silence about the underlying conduct.

A compliant contract can still be an outrageous bargain

CERS’s description emphasizes checking whether contracts are being followed. That is useful work. It is also an inadequate stopping point.

A private equity manager can follow an agreement perfectly while collecting excessive compensation under its terms.

If Kentucky agreed to an overpriced arrangement, confirming that the manager charged the agreed price does not establish that the price was prudent.

The review must distinguish among billing errors, unauthorized expenses, contractually permitted but excessive charges, and the total economic cost of the investment.

Otherwise, “the contract was followed” could become the latest defense of a terrible contract.

Pension data must stay out of competitors’ hands

XTP says it obtains detailed investment cost information, investigates contractual compliance and negotiates with service providers. Its website also claims that it has no conflicts because it works exclusively for asset owners.

That claim deserves scrutiny across the ownership structure.

An investigator could obtain information about competitors’ fee concessions, side letters, expense practices and negotiating positions. Those records can have substantial commercial value.

Kentucky should require explicit restrictions preventing identifiable manager information from reaching Apollo, other investment managers, or unauthorized affiliates and owners. Those restrictions should be independently tested.

Access to public pension contracts must never become a private intelligence service for a connected investment business.

Kentucky needs public rules and an independent referee

The legislature, trustees and state oversight officials should require:

• Full disclosure of the XTP agreement, including compensation definitions, caps, exclusions, termination provisions and confidentiality terms.
• A published review plan identifying covered managers, priorities and objective standards for scrutiny.
• Independent examination of connected firms, including any Apollo or Wilshire-related relationships within the assignment.
• Independent verification of savings, excluding automatic fee step-downs, reductions caused by declining assets, and concessions already secured by others.
• Separate treatment of recovered overcharges, so money already owed to retirees is not casually treated like a newly negotiated discount.
• Public reporting of findings and unresolved problems, with protections against settlements that conceal misconduct or unnecessarily waive claims.

Trustees must also compare the bounty with competitively priced alternatives. A contingent fee may reduce upfront spending, but half the recovery can still be an extraordinary price.

Retirees deserve the whole investigation

I have written about Kentucky’s pension funding problems and shrinking purchasing power, and questioned the priorities of politically directed pension examinations.

The same standard applies here: follow the money, disclose the conflicts and examine every manager under consistent rules.

XTP may identify meaningful savings. Kentucky should recover every dollar it can. But successful recoveries would not erase ownership conflicts, justify selective scrutiny, or establish that the remaining fees are reasonable.

Kentucky retirees should not have to wonder whether the firm investigating Wall Street’s fees is protecting a financially connected Wall Street interest.

Open the contracts. Publish the targets and the findings. Put connected firms under an independent examiner. Make every dollar of the bounty auditable.

A fee investigation that leaves the secrecy intact risks becoming one more profitable layer of the pension problem.

By Chris Tobe, CFA, CAIA | The CommonSense 401k Project

Your 401(k) statement may show a familiar American investment company, a target-date fund, or an insurance company promising safety. That label does not tell you whether your retirement savings depend on a Cayman partnership, a Luxembourg credit fund, a Bermuda reinsurer, or several of them.    401(k)s in SEC registered mutual funds do not have to worry nearly as much about these issues, but as these assets go under 50% of 401ks, CITs and other more non-transparent vehicles need more scrutiny.

Congress should require the annual Form 5500 filing to show that entire chain. Workers should be able to discover where their retirement investments are legally organized, who controls the money, how fees are collected, and what happens when they want it back.

Offshore is already a major part of private finance

The SEC’s Private Fund Statistics for the fourth quarter of 2025 show that 45.4% of reported private-fund net asset value was domiciled outside the United States. Cayman alone accounted for 29.7%.

The differences across categories matter. Cayman represented 53.7% of qualifying hedge-fund NAV and 23.8% of the Section 4 private-equity-fund population. These are asset shares within SEC reporting populations, not percentages of all limited partnerships worldwide. www.sec.gov

Private credit has a substantial offshore infrastructure too. An Alternative Credit Council/Dechert survey found that approximately 59% of responding managers used Cayman for private credit funds, and approximately 59% used Luxembourg. Managers could select multiple domiciles; these figures measure managers’ use of jurisdictions, not global market shares. www.dechert.com

Offshore structures are part of the machinery that can stand behind retirement products marketed to American workers.

Follow legal ownership and follow the money

A Cayman domicile does not prove that a plan wired its contribution to a bank in Cayman. The fund could use a U.S. bank account and invest in American businesses. A domestic fund can also invest through offshore entities.

That complexity strengthens the case for disclosure.

A bank address answers one question. The partnership agreement answers another. Neither alone reveals the complete investment.

Tax planning is often part of the design. Offshore corporate blockers can address unrelated business taxable income for tax-exempt investors. Other structures address foreign investors’ exposure to U.S. taxation. Legal form and tax classification matter: an offshore partnership is not automatically a corporate blocker. www.sec.gov

Workers deserve to know whose tax problem the structure solves, who benefits, what it costs, and whether it changes their recovery rights.

“Tax efficient” should begin an explanation. It should never end the inquiry.

Target-date funds can conceal the chain behind a retirement year

In “401(k): Who Is Your Regulator—DOL, SEC, Iowa, Nevada, or the Caymans?”, I described the accountability problem created by layers of trusts, insurance contracts, and private investments.

In “Target-Date Fund Risk Games: Change the Accounting, Declare the Portfolio Safer,” I examined a related problem: portfolios can combine publicly priced investments with private assets whose changing values appear on a different timetable.

Together, those issues create a dangerous disclosure gap.

An investment can sit several layers below the option named on a participant’s statement. Its fees, borrowing, withdrawal restrictions, and valuation practices can become difficult to identify. Meanwhile, delayed recognition of changing values can make reported volatility and correlation look reassuring.

An offshore address does not establish valuation abuse. But neither does a daily target-date-fund price establish that every underlying investment was independently repriced that day. The CommonSense 401k Project

Congress should require disclosure that connects legal structure to economic exposure and the methods used to measure it.

Annuities bring a second offshore route

Fixed annuities deserve particular scrutiny because the insurance promise can obscure the assets and counterparties supporting it.

Life insurers increasingly rely on private credit. A Chicago Federal Reserve working paper, revised in April 2026, identified $849 billion of private-placement credit on life insurers’ balance sheets in 2024, representing 14% of general-account assets. The authors found private-equity-owned insurers were important drivers of the growth. chicagofed.org

Private credit can involve offshore funds, financing vehicles, and securitization issuers. Separately, insurers can transfer economic exposure through offshore reinsurance. These channels can overlap. Neither should disappear from retirement-plan disclosure.

Treasury’s 2025 insurance report described reserves ceded to offshore jurisdictions as nearly quadrupling between 2019 and 2023, to more than $450 billion. It identified offshore reinsurance as a potential blind spot in conventional leverage measures. home.treasury.gov

An annuity’s U.S. issuer therefore does not supply a complete map of its financial backing.

Nor does “reserves offshore” necessarily mean a corresponding pile of cash moved overseas. Under funds-withheld and modified-coinsurance arrangements, backing assets can remain on the originating insurer’s books while contractual arrangements transfer economic exposure. www.federalreserve.gov

That raises concrete questions. Who selects the assets? Can an affiliated manager collect fees? What collateral supports the reinsurer’s obligation? What happens if the insurer must recapture the business during a crisis?

A “guaranteed” label answers none of them.

Congress should mandate a Form 5500 investment-chain schedule

Form 5500 already has insurance, service-provider, financial, and pooled-investment reporting components. Congress should build on that system and require standardized disclosure through every material layer. Naming the outer fund is inadequate. dol.gov

The legislation should require:

1. The complete entity chain. Identify each feeder, master fund, partnership, blocker, holding company, insurer, and reinsurer creating material exposure. Report domicile, controlling owner, legal form, relevant regulator, and unique identifier. Cover direct holdings and material indirect exposures.
2. The dollars exposed. State the plan’s investment and its attributable exposure by jurisdiction, asset class, and counterparty. Distinguish legal domicile, custody location, and the location of underlying borrowers or assets. Reconcile totals to prevent double counting.
3. The purpose and cost of offshore entities. Explain tax, financing, marketing, or regulatory reasons for each material offshore layer. Identify beneficiaries and associated expenses.
4. Every layer of compensation. Disclose management fees, carried interest, financing costs, affiliate payments, commissions, revenue sharing, and insurance compensation. For fixed annuities, report portfolio yield, participant crediting rates, and retained spread on a defined, consistent basis, identifying estimates and allocation limits.
5. Liquidity and control. Disclose gates, capital calls, surrender charges, market-value adjustments, borrowing, collateral pledges, and rights to suspend payments. Identify who controls the assets and who can change those terms.
6. Valuation and risk methods. Identify valuation frequency, independent pricing, manager estimates, and adjustments for stale prices. Explain how volatility, correlation, and diversification claims account for differing valuation schedules.
7. An insurance-specific offshore supplement. Identify relevant reinsurance arrangements, ceded exposure, affiliate relationships, assets retained or transferred, collateral, recapture provisions, and applicable solvency regimes. Where general-account assets are pooled, require issuer-level disclosures and explain any allocation to the plan; do not invent contract-specific ownership of backing assets.
8. Public, usable reporting. Require searchable, machine-readable filings and a plain-English participant summary. Protect account numbers and personal information while making material structures, fees, and risks public.

Secrecy cannot be the price of admission

Congress should place a direct information-supply obligation on providers seeking access to ERISA retirement money. Plan fiduciaries should have to obtain and evaluate the disclosures. Providers should certify their submissions, and material omissions should carry enforceable penalties and correction requirements.

“Proprietary” should not excuse withholding material fees, offshore counterparties, or withdrawal restrictions.

The legislation should establish that adding a feeder, CIT, insurance contract, or offshore affiliate does not extinguish the disclosure obligation. Exposure must remain traceable through the structure.

Workers receive tax benefits to save for retirement. Financial firms receive access to those savings. Congress should make access conditional on accountability.

If Wall Street wants offshore structures in America’s 401(k)s, it should have to explain every material layer in a public Form 5500 filing.

Workers should not need a subpoena to learn what stands behind their retirement savings.

 

By Chris Tobe, CFA, CAIA | The CommonSense 401k Project

Fred Reish, one of the leading attorneys advising retirement plan fiduciaries, deserves credit for explaining an issue the investment industry too often buries beneath sales presentations: liquidity.

His October 12 article draws a useful distinction. Under the Department of Labor’s proposed investment regulation, SEC-registered open-end mutual funds offer a straightforward route to the protection addressing plan-level liquidity because of their required liquidity risk management programs. Collective investment trusts require additional investigation and review. Reish also recognizes the danger that reliance on provider representations can become a box-checking exercise. Fred Reish

That is excellent practical guidance—and an invitation for plan sponsors to ask harder questions.

The protection he discusses is proposed and limited to this liquidity issue. It is not blanket immunity for selecting a mutual fund. But the practical lesson is compelling: the mutual-fund framework already supplies a protection that sponsors choosing other vehicles must investigate themselves.

The committee needs an exit, too

The DOL proposal identifies plan terminations, recordkeeper changes, and corporate transactions as potential sources of substantial redemption demands. It also recognizes that withdrawals by other investors can disrupt a pooled vehicle’s allocation. These are operating concerns that committees need to examine before investing. govinfo.gov

A retirement committee should ask a plain question before buying any complicated investment:

If we decide this manager should be fired, how do we get our money back?

A participant’s ability to make an ordinary withdrawal does not answer whether the employer can move the entire plan’s investment.

Consider a hypothetical target-date CIT that accommodates normal withdrawals using incoming contributions and publicly traded holdings. The arrangement may function comfortably until a large employer leaves, several plans redeem together, or a market decline coincides with rising withdrawals.

The committee needs to understand what happens then. Who can delay payment? What notice is required? Can withdrawals be capped? What assets get sold first? Who bears the cost?

A marketing promise of liquidity is only as useful as the contracts and assets supporting it.

The target-date label does not answer the liquidity question

My concern is especially acute when private equity, private credit, or restrictive insurance contracts sit inside target-date CITs.

A retirement-year label tells the committee almost nothing about the enforceable withdrawal terms of the underlying investments.

The committee should demand a complete explanation of how the outer fund’s redemption promises fit the underlying contracts. If one layer offers frequent withdrawals while another can hold capital for years, someone must explain how that mismatch is managed—and who bears the consequences if the assumptions fail.

Here is a simple hypothetical. A portfolio begins with $90 in liquid assets and $10 in illiquid assets. Investors redeem $40, paid entirely from the liquid holdings. The remaining portfolio contains $50 in liquid assets and the same $10 in illiquid assets.

The illiquid allocation has risen from 10% to approximately 16.7%, without buying another dollar of private investments.

The people who remain now hold a different portfolio. A committee should want to know whether the manager has tested that situation before workers experience it.

Smooth accounting can hide the problem

In my recent “Target-Date Fund Risk Games” article, I explained how delayed private-asset valuations can depress measured volatility and distort correlations. That concern belongs directly beside the liquidity analysis. The CommonSense 401k Project

A model may praise an allocation for its smooth reported returns while overlooking the difficulty of selling it at its stated value. Publishing a daily fund price does not prove that every underlying holding has been freshly valued or can be converted into cash at that price.

Consultants should have to explain both the valuation assumptions behind their risk charts and the withdrawal assumptions behind their liquidity claims.

Otherwise, a committee can be sold an investment as “safer” precisely because its accounting recognizes market stress slowly, while its contracts make responding to that stress more difficult.

Follow the contracts through every layer

My “Who Is Your Regulator?” article makes the related transparency argument: the committee needs to see through the investment’s outer wrapper. Banking supervision of a CIT trustee does not make the structure identical to an SEC-registered mutual fund or answer every question about its underlying contracts. The CommonSense 401k Project

The relevant questions reach every material underlying fund, partnership, and insurance contract.

Congress should require a standardized Form 5500 attachment identifying those layers, their regulators, material withdrawal restrictions, valuation methods, and the costs of exit. Providers should have to supply the information. Committees should document their review.

Workers should not need litigation to discover where their retirement money can become trapped.

The easiest route deserves serious consideration

My conclusion from Reish’s analysis is straightforward: for sponsors seeking a simpler, more transparent liquidity review, SEC-registered mutual funds offer an obvious place to start.

A CIT can have a legitimate investment rationale. The sponsor should still demand a concrete explanation of its benefits after accounting for fees, transparency, withdrawal rights, and the additional work required to evaluate them.

A lower advertised expense ratio cannot settle that comparison if the committee has not examined the underlying costs and restrictions.

Reish deserves praise for making the distinction clear. Committees should act on it.

Before putting workers into a more complicated structure, explain why the benefits justify the complications—and show exactly how the money gets out.

By Christopher B. Tobe, CFA, CAIA | The CommonSense 401k Project

I support considering environmental, social and governance factors when they help protect retirement savers. Climate exposure, workforce practices, conflicts of interest and corporate accountability can affect investment results. Fiduciaries should examine those risks.

But ESG has become a political football. Republicans attack the E and S. Democrats celebrate them. Too often, both sides ignore the G—and Wall Street collects the fees.

Governance means opening the books, controlling conflicts, verifying performance, understanding liquidity and protecting participants from excessive costs. An investment does not become well governed because its manager signs a sustainability pledge. Nor does it become prudent because a politician calls it “anti-woke.”

The Trump Department of Labor deserves especially sharp criticism. Its alternative-investment agenda would expand access to expensive, opaque structures while offering fiduciaries additional protection from litigation. That is a peculiar way to put workers first.

Trump’s DOL attacks the label while opening the door to the products

President Trump’s August 7, 2025 executive order directed the DOL to facilitate alternative investments in retirement plans, consider safe harbors and prioritize actions to curb ERISA litigation. The department rescinded its 2021 supplemental private-equity caution on August 12, 2025.

The March 2026 investment-selection proposal would establish a process-based prudence safe harbor. It identifies performance, fees, liquidity, valuation, benchmarking and complexity as factors for review.

Those are legitimate subjects. The problem is what counts as an adequate answer—and how much protection the government would give fiduciaries who accept the industry’s answers.

The proposal’s fee framework considers not only risk-adjusted expected returns but other “value,” including benefits, features and services. I see a dangerous opening: high fees can be defended through a growing collection of claimed benefits that are difficult for participants to measure.

Will workplace sales access be repackaged as financial education? Will proprietary-product marketing become participant engagement? Will a consultant’s endorsement help turn an expensive investment into a supposedly valuable service package?

Those are risks the DOL should close off explicitly. A sales opportunity for a provider is not automatically a benefit for a worker.

The department should demand stronger evidence before workers’ money enters opaque products. Instead, this proposal risks making a documented process a shield for accepting weak evidence.

Pro-ESG and anti-ESG can be the same business strategy

The administration’s hostility to ESG is especially hollow when the private-market firms positioned to benefit have promoted ESG themselves.

KKR says it became a signatory to the UN-supported Principles for Responsible Investment in 2009. Blackstone identifies its signatory status beginning in July 2021. Signing the PRI expresses a commitment to incorporating ESG into investment practices. It is not independent certification that every fund is transparent, inexpensive or prudently managed.

In my earlier Allison Ball article, I examined KKR’s reported former sponsorship of the State Financial Officers Foundation alongside its ESG commitments and Kentucky pension business. The governance question is who finances the political infrastructure surrounding investment decisions—and what the public can see about those relationships.

A firm can market sustainability to one audience while maintaining relationships with an anti-ESG political network. That does not establish an illegal payment or purchased decision. It does expose how little an ESG label tells us about actual accountability.

Wall Street can sell to both camps. Participants pay either way.

ESG does not require expensive investments

There are low-cost ESG-screened index mutual funds and ETFs. Vanguard’s ESG U.S. Stock ETF, for example, lists an expense ratio of 0.09%.

A fiduciary can evaluate an ESG-screened index option using familiar questions: What does it own? What does the screen exclude? How much does it cost? How does it change diversification, sector exposure and expected risk?

Some screened portfolios may differ only modestly from an unscreened alternative. Others may differ substantially. Nobody should declare their returns “indistinguishable” simply because both are index funds. The comparison must be demonstrated.

But the existence of low-cost screened products destroys the argument that considering ESG requires paying private-equity fees or accepting an opaque insurance contract.

If two options genuinely serve participants’ financial interests equally, an ESG preference can help decide between them. A higher-fee manager should have to substantiate its financial case rather than sell a moral excuse for the fee.

Keep the tiebreaker from becoming a fee loophole

The regulatory history matters. The 2020 rule used an “indistinguishable” financial comparison. The Biden DOL’s 2022 rule broadened the formulation to investments that equally serve the plan’s financial interests over the appropriate time horizon, allowing collateral benefits to break a genuine tie.

It also retained the prohibition against sacrificing returns or taking additional investment risk to pursue unrelated objectives.

My position is straightforward: keep that participant-first constraint real. Do not broaden the tiebreaker further, and do not allow speculative collateral benefits to manufacture financial equivalence.

The Trump DOL’s alternative-investment proposal is a separate regulatory initiative. But its expansive treatment of other “value” raises a related danger: higher costs being justified by benefits whose value to workers is asserted rather than proved.

Neither party should permit ESG, education, diversification or lifetime-income branding to become an all-purpose excuse for higher fees, more risk and less transparency.

Governance starts with the investment contract

The G must apply to the product holding participants’ money, not merely the companies in a manager’s sustainability report.

Private-fund interests can be securities, and their advisers may be SEC registered. That does not give the fund the same regulatory structure and public disclosure obligations as an SEC-registered mutual fund. Adviser registration is not mutual-fund registration.

Private-equity and private-credit valuations often depend on models and managerial judgments rather than current market transactions. That creates a governance conflict when valuations also influence reported performance, fundraising or compensation. An audit does not turn an estimate into an executable market price.

The Global Investment Performance Standards provide a framework for performance reporting, including alternative investments. They are voluntary; verification is also voluntary. Fiduciaries should demand the actual performance report, the scope of any compliance claim and independent assurance relevant to the investment being offered. A firm-level marketing statement does not answer every fund-level question.

For a Cayman-domiciled partnership, the questions should be concrete: Which legal entity receives the money? Who holds the assets? What records can the fiduciary obtain? Which court can enforce the investor’s rights? How can the plan exit? Offshore domicile alone does not prove misconduct, but complexity must never substitute for accountability.

Fixed annuities present another governance problem. The insurer declares the credited rate under the contract and can retain an embedded spread that participants cannot readily inspect. A stable account balance does not itself disclose the economic value of the assets supporting the promise, the insurer’s credit risk or the cost of leaving.

Insurance regulation is not the same as mutual-fund regulation. Fiduciaries should demand enforceable protections, clear compensation disclosures and a credible assessment of credit and liquidity risk.

Private real estate and digital assets require scrutiny of their own valuation, custody, leverage and exit arrangements. A registered wrapper cannot erase the risks of what it holds.

An ESG attribute cannot cure a badly governed investment structure.

Indiana exposed the hypocrisy—and the cost of political shortcuts

In 2023, an Indiana fiscal analysis projected that an anti-ESG proposal could reduce pension investment returns by approximately $6.7 billion over ten years, including by restricting access to private markets and active managers.

That estimate was a forecast, not a realized liquidation loss. It does not prove that private partnerships would universally sell for 70 cents on the dollar.

But it exposed a contradiction: sweeping anti-ESG policies can collide with pension investments in firms that have embraced ESG commitments. Politicians cannot coherently condemn an entire investment philosophy while quietly exempting favored high-fee managers.

Nor should Democrats treat those managers’ ESG pledges as evidence of good governance. As I argued in my CalPERS ESG critique, sustainability branding cannot excuse inadequate scrutiny of the investment manager and its contracts.

For illiquid assets, fiduciaries should disclose credible exit-price evidence before anyone orders a political divestment—or claims that maintaining the investment is costless.

Put the G back into fiduciary responsibility

Congress and the DOL should require disclosure of every layer of compensation, valuation methods, relevant performance standards, independent assurance, liquidity restrictions, affiliated transactions and material political or lobbying relationships.

For target-date and other multiasset funds, those disclosures must reach the underlying investments. A reassuring label on the outer fund is insufficient.

Fiduciaries should document why an expensive or opaque structure serves participants better than a transparent, lower-cost alternative. Claimed education benefits should identify actual services, costs, conflicts and limits on product solicitation.

Republicans should stop attacking ESG while promoting high-fee firms that practice it. Democrats should stop accepting ESG branding as a substitute for accountability.

The Trump DOL should stop treating expanded product access and reduced litigation exposure as substitutes for stronger participant protection.

I am pro-ESG when it means examining material risks and holding managers accountable. I oppose using it to excuse expensive, conflicted investments.

The G stands for governance. Open the books. Verify the claims. Protect the participants.

Sources and related Commonsense articles

• Trump executive order on alternative investments
• DOL rescission of the 2021 supplemental statement
• DOL March 2026 proposed investment-selection rule
• DOL 2022 ESG final rule
• KKR on its PRI commitment
• Blackstone on sustainability and PRI
• Vanguard ESG U.S. Stock ETF
• SEC overview of private funds
• CFA Institute GIPS standards
• Federal Reserve review of SVB
• SVB governance-rating analysis
• Indiana projected anti-ESG costs
• Allison Ball’s ESG Shell Game
• CalPERS ESG Failure
• Trump’s 401(k) Woke Shell Game