Ohio removed two trustees over a QED proposal that invested $0. Meanwhile, billions actually flowed to private equity—and the man behind QED headed an organization connecting financial firms with the public officials controlling trillions.

Something has always been backwards about the Ohio STRS scandal.

Economics professor and former national AAUP president Rudy Fichtenbaum and fellow STRS trustee CPA Wade Steen were portrayed as participants in a gigantic scheme involving an obscure startup called QED.  Ohio Attorney General Dave Yost ultimately succeeded in having both removed from the STRS board.  But start with the money.

How much STRS money was actually invested in QED?

$0.

How much did QED pay Fichtenbaum?

Not $1 has been shown.

How much did QED pay Steen?

Not $1 has been shown.

How much did STRS lose investing in QED?

$0.

QED never got the money. Because they never really existed.  Never held $1, never registered as investment manager

Meanwhile, STRS was actually investing billions in private equity and other opaque alternatives, generating enormous fees and expenses while STRS investment employees collected millions in performance bonuses.

Those were precisely the investments, performance numbers, fees and bonuses that the reform trustees were questioning.

The Alleged Investment Mastermind Was Really an Ohio Republican Political-Financial Operator

Now look at Seth Metcalf, one of the principals behind QED.

Metcalf wasn’t a Blackstone or KKR portfolio manager.

His expertise was arguably more useful: Ohio politics, public finance and access to the people controlling public money.

His relationship with Republican Josh Mandel reportedly began when Metcalf managed Mandel’s student-government campaign at Ohio State.

After Mandel became Ohio Treasurer, Metcalf became his Deputy Treasurer and Executive Counsel.    This appears to be a Republican factional dispute between Treasurer Mandell vs. AG Yost.

Metcalf’s own State Financial Officers Foundation biography says that in the Treasurer’s office he helped oversee functions involving more than $20 billion of investments, $216 billion of custody assets and $60 billion of annual cash movements. He had also served as a trustee of OPERS and the Ohio Deferred Compensation Plan.

So Metcalf understood something extraordinarily valuable:

How public pension money gets allocated—and who controls the process.

Then Metcalf Became President of SFOF

This is where the QED story gets considerably more interesting.

Metcalf became president of the board of the State Financial Officers Foundation, a national organization connecting Republican state treasurers and other financial officials with private financial interests.  And among SFOF’s former financial supporters was one of the world’s largest private-equity firms:

KKR.

Historical sponsor records identify KKR as a former “Friend of SFOF.” Other financial-industry sponsors or supporters included Fidelity, Invesco, Entrust Global, Federated Hermes, JPMorgan and Wells Fargo.

KKR’s SFOF relationship has also been independently documented in research examining the private-equity firm’s political activities.

What was access to Ohio STRS worth?

STRS Was a Private-Equity Gold Mine

QED’s supposed “$65 billion” was hypothetical.

STRS’s private-equity money was real.

STRS has had roughly $10 billion of private-equity NAV and billions more of unfunded commitments, while regularly committing another billion dollars or more to PE funds.

For a KKR, Apollo, Blackstone, Ares or aspiring private-market manager, getting onto STRS’s manager roster can therefore be worth enormous amounts of money over time.

That changes how we should think about Metcalf.   Perhaps the valuable asset wasn’t QED’s investment technology.   Perhaps the valuable asset was access.  Metcalf had been:

Mandel political operative>Ohio Deputy Treasurer>OPERS trustee>Ohio Deferred Compensation trustee>President of SFOF>>QED principal

This was someone who understood the machinery connecting politicians, pension trustees, investment staffs and Wall Street.

KKR Makes the Contrast Remarkable

SFOF’s relationship with KKR deserves particular scrutiny.

KKR financially supported an organization headed by Metcalf whose membership consisted largely of state financial officials.

And there is a revealing example of what happened at SFOF meetings.

Alaska Permanent Fund travel records show its executive director traveled to SFOF’s 2017 annual meeting—and during that same trip met with KKR.

An enormous private-equity manager could participate in the same ecosystem bringing together officials controlling billions of public dollars.    Metcalf headed that organization.

And Metcalf himself had already sat on the board of one of America’s largest public pension systems.

Yet Ohio’s great fiduciary scandal somehow became:

Rudy Fichtenbaum talked to Seth Metcalf.

Two Very Different Standards

The contrast is extraordinary.

Metcalf/SFOF model:

Financial companies>SFOF>State treasurers and financial officers>Officials with influence over trillions in public assets

This was considered networking.

But:

Metcalf/QED>Fichtenbaum & Steen>Discussion of an investment concept>$0 invested

became a corruption scandal resulting in the removal of two pension trustees.

And nobody demonstrated that Fichtenbaum or Steen pocketed even $1 from QED.

Now Ask Who Actually Had Something to Lose

Fichtenbaum and Steen weren’t merely discussing QED.

They were part of a reform movement questioning the existing STRS investment establishment.

That meant asking uncomfortable questions about:

Private-equity fees.

Secret contracts.

Investment performance.

Benchmarks.

Staff compensation.

Millions of dollars in bonuses.

Those questions involved real money.

QED did not.

And this distinction becomes particularly important because recent academic research found that STRS’s reported investment return exceeded the return researchers calculated from audited financial information in 19 of 20 years.

Those performance numbers mattered because STRS investment employees received performance bonuses.

So ask the most basic investigative question:

Who actually had a financial interest in stopping the reform trustees?

The professor who received no demonstrated QED payoff?

Or the enormous existing ecosystem of investment managers, consultants and highly compensated investment employees whose fees, contracts, performance and bonuses were being questioned?

The Missing Question: What Could Metcalf Have Done With Influence?

This is the part of the story Ohio investigators apparently never pursued seriously.

Suppose Metcalf had obtained significant influence with a majority bloc on the STRS board.

He wouldn’t necessarily need QED to personally manage $65 billion.

Someone with Metcalf’s background would understand that influence over a pension board overseeing roughly $100 billion could itself be enormously valuable.

STRS staff negotiates and executes investment-manager mandates and fee agreements under authority delegated through the pension’s governance structure.

The system continually needs:

Private-equity managers.

Private-credit managers.

Real-estate managers.

Co-investments.

Joint ventures.

Consultants.

Technology.

Advisers.

And new investment ideas.

Wall Street firms compete ferociously for that business.

An intermediary doesn’t have to personally manage billions to potentially benefit from being able to open doors.

That does not establish that Metcalf intended to do any of those things.

But given his background, it is an obvious question investigators should have asked.

Especially Because SFOF Was Already Selling Access

This isn’t merely theoretical.

SFOF’s corporate model brought financial companies together with state financial officials.

And Metcalf was its board president.

The organization became sufficiently intertwined with financial-industry interests that Campaign for Accountability asked the SEC in 2024 to investigate whether investment-adviser support for SFOF could implicate pay-to-play rules.

Then in May 2026, the same watchdog organization called for Metcalf himself to be removed as SFOF president because of his QED activities.

There is a remarkable irony here.

Ohio’s government successfully removed Fichtenbaum and Steen from STRS.

Yet the politically connected entrepreneur whom the court portrayed as directing them remained president of an organization connecting financial interests with public officials.

Maybe QED Wasn’t the Scandal. Maybe It Was the Weapon.

Nobody needs to believe QED was a good investment idea.

It wasn’t an established investment manager. It had no clients or track record and never received STRS assets. Even critics of the prosecution can readily conclude STRS should never have handed it billions.

But that’s not what happened.

QED got $0.

Meanwhile, STRS’s existing Wall Street managers got billions.

And the trustees raising questions about those billions were removed.

That is why Ohio should reopen the question from the opposite direction.

Don’t start with QED.

Start with the billions actually invested.

Identify every STRS private-equity manager.

Identify every fee.

Identify every no-bid or privately negotiated mandate.

Identify every SFOF sponsor.

Then cross-match them.

KKR is an obvious place to start.

KKR supported SFOF.

Metcalf ran SFOF.

Metcalf understood Ohio pension governance from the inside.

And STRS represents precisely the kind of enormous institutional pool private-equity firms compete to access.

If KKR and other SFOF-connected financial firms also held substantial STRS mandates during this period, that relationship deserves far more scrutiny than an imaginary $65 billion QED investment that never happened.

Metcalf didn’t have to imagine whether SFOF relationships could be monetized in the public-pension business. He could watch it happen. While Metcalf served as SFOF’s board president, the organization elevated fellow Ohio entrepreneur Vivek Ramaswamy as a leading anti-ESG voice. Ramaswamy then launched Strive—the “anti-BlackRock”—and SFOF-connected officials helped open doors to public pension systems. Missouri’s treasurer acknowledged that he was connected to Ramaswamy through SFOF; Strive officials met pension officials through the network; and Strive ultimately won public-pension advisory business. In other words, the SFOF model demonstrated that political-financial relationships could become pension business. Metcalf, a former Ohio deputy treasurer and OPERS trustee, would have understood that lesson better than almost anyone

Follow the Two Piles of Money

Ohio followed this pile:

QED: $0

It found Rudy Fichtenbaum and Wade Steen.

Now follow the other pile:

Private Equity: Billions

There you find investment managers, secret contracts, fees, consultants, staff bonuses—and potentially some of the same financial networks surrounding the politically connected man at the center of QED.

Ohio spent years investigating the professor who questioned the system.

Maybe it’s finally time to investigate the system he was questioning.

SFOF expose by Lever https://www.levernews.com/alleged-fraudsters-are-fueling-trumps-fraud-crusade/ https://www.documentcloud.org/documents/28133993-may-2026-sfof-letter/?ref=levernews.com

Ohio STRS Investment Staff: Paid Excessively to Look the Other Way

EPSTEIN, APOLLO, AND OHIO TEACHERS’ BILLIONS

Apollo Divestment Case for Jeffrey Epstein ties stronger after Wyden Letter

Columbus: The Highest Public Salaries in America — and Ohio Teachers are Paying for It

Ohio’s Epstein Blind Spot: While Wexner Dominates Headlines, Apollo’s Leon Black remains in Shadows

Ohio Media’s Complicity: How a Fake Scandal Hid the Real Teacher Retirement System Corruption

Private equity has spent decades operating where most Americans rarely see it.

A pension fund owns an LP interest in a private-equity fund. The PE fund owns dozens of companies. The contracts are secret. The fees are complicated. The valuations are subjective. The conflicts are buried in hundreds of pages of documents.

Try explaining that at a neighborhood bar.

Now private equity is buying something entirely different:

Your team.

And that may turn out to be one of Wall Street’s biggest political mistakes.

Fans Aren’t Pension Trustees

People have emotional relationships with sports teams that they simply do not have with investment funds.

They grow up with them.

Their parents took them to games.

They buy jerseys for their children.

Cities build stadiums around them.

And increasingly, millions of Americans have actual money riding on what happens on the field through legalized sports betting.

That creates an explosive combination:

Private capital + beloved civic institutions + billions of dollars of gambling + relatively weak and fragmented regulation.

Private equity may have just kicked over a hornet’s nest.

Sports Has Become an Alternative Asset Class

Institutional investors reportedly now hold interests in dozens of North American professional teams.

MLB opened the door to private-equity ownership in 2019.

The NFL followed in 2024.

The NBA, NHL and international soccer have their own variations.

The sales pitch sounds remarkably similar to what pension funds and 401(k) fiduciaries hear about private markets:

Sports franchises are scarce assets.

Revenue is resilient.

Media rights provide predictable cash flows.

Fan loyalty creates barriers to entry.

Franchise values have historically appreciated.

In other words, Wall Street has discovered that perhaps the ultimate captive customer is a sports fan.

The Lakers Are a Warning

The extraordinary escalation in the valuation of the Los Angeles Lakers illustrates what is happening.   A franchise isn’t simply a basketball team anymore.  It is a media asset.

A real-estate opportunity.  A sponsorship platform. A gambling ecosystem. A data business. An entertainment property. And increasingly, an institutional investment.

The danger is that the incentives of the financial owner and the interests of the fan aren’t necessarily the same.

The old owner might have wanted to win a championship. The new financial owner also has to think about IRR. That difference matters.

Henry Abbott Has Been Asking the Right NBA Questions

Basketball journalist Henry Abbott has spent years examining the economics and governance of the NBA rather than simply covering what happens on the court.

Josh Harris is an especially interesting case study.

The modern sports billionaire may simultaneously operate across private equity, professional sports, finance, media relationships and other businesses.

That doesn’t establish wrongdoing.

But it creates something regulators and journalists should understand very well:

conflicts.

And sports leagues largely depend upon themselves to police those conflicts.

Then Add Gambling

This is where the issue becomes much larger.

Professional sports isn’t merely entertainment anymore.

Americans are wagering enormous sums on games, players and individual events within games.

That changes the public-policy stakes.

An owner isn’t merely controlling an entertainment company.

The owner controls an organization producing events upon which outsiders are wagering billions of dollars.

Suddenly questions that once sounded like obscure corporate-governance issues become much more important:

Who owns pieces of multiple teams?

What other businesses do those owners control?

Who finances the teams?

Who owns the media companies?

Who has relationships with sportsbooks?

Who owns the data?

Who receives nonpublic information?

What investments do the owners’ funds hold in companies doing business with their teams or leagues?

And who is actually checking?

Britain Already Knows What Financialization Can Do to Sports

American regulators should spend some time studying British football.

The UK provides decades of examples of what can happen when football clubs become financial assets: leveraged acquisitions, complicated ownership structures, related-party transactions, distressed clubs and supporters discovering that the institution they regarded as belonging to their community was legally somebody else’s financial property.

British football journalist Paul Brown and others have chronicled parts of this transformation.

American sports may be traveling down a similar road—with private equity and sports betting added to the mix.

Now Follow the Money Back to Pension Funds

Here is the part almost nobody in sports journalism is connecting.

Where does private equity get the money?

Much of it ultimately comes from institutional investors.

Public pension funds.

Corporate pension funds.

Endowments.

Foundations.

And increasingly, Wall Street wants access to 401(k)s.

So a teacher, firefighter or state employee can potentially participate in this system twice.

First as a fan, paying increasingly expensive tickets, television subscriptions, merchandise and perhaps gambling losses.

Then as an investor, with retirement money committed to the private funds participating in the financialization of sports.

And the worker may have remarkably little ability to examine what is happening with either role.

The Same Governance Problems Keep Appearing

This is what makes the sports story so important.

The issues are remarkably similar to the problems we have documented in private equity generally:

Opaque ownership.

Secret contracts.

Related-party transactions.

Complicated fee structures.

Questionable valuations.

Multiple layers of intermediaries.

Potential conflicts involving advisers and investors.

Weak or fragmented regulatory oversight.

Enormous amounts of institutional money.

And perhaps most importantly:

The people whose money ultimately finances the system often have the least information about it.

Wall Street Wants Your 401(k), Too

This comes at precisely the moment private-equity managers are trying to expand into America’s enormous defined-contribution retirement system.

As CommonSense recently documented, Bloomberg found evidence raising serious questions about thousands of supposedly grassroots comments supporting the Labor Department’s private-equity initiative—including comments attributed to people who were already dead.

The economic incentive isn’t difficult to understand.

Traditional institutional investors have become increasingly concerned about private-market fees, liquidity, valuations and distributions.

Wall Street needs additional capital.

America’s 401(k) system contains trillions of dollars.

The sports boom provides another window into the same phenomenon.

Private equity keeps searching for pools of dependable cash flow.

Pensions provide dependable capital.

401(k)s provide dependable contributions.

Sports provide dependable fans.

And sports betting provides another enormous stream of money surrounding those fans.

The Hornet’s Nest

Private equity has survived decades of criticism over pension investments partly because pension governance is boring.

LPAs are boring.

Valuation policies are boring.

Fee reconciliation is boring.

ERISA prohibited-transaction rules are boring.

Try telling a Lakers fan that the people financing his team may have undisclosed conflicts.

That isn’t boring.

Try telling a Manchester United supporter that his club is primarily an asset on somebody’s balance sheet.

Not boring.

And try telling someone who just wagered $2,000 on a game that the ownership, financing and business relationships surrounding the teams are too complicated or proprietary for the public to examine.

Definitely not boring.

That is why sports could become private equity’s unexpected political problem.

Private equity didn’t merely buy another portfolio company.

It bought something people love.

And unlike pension beneficiaries trying to obtain a private-equity contract from their retirement system, sports fans number in the tens of millions.

They watch every night.

They argue about every decision.

They follow every dollar.

And increasingly, they bet real money on the outcome.

Private equity may discover that sports fans are considerably harder to manage than pension trustees.

Private equity has found its most powerful argument for getting into 401(k) target-date funds:

“Private equity lowers portfolio risk because it has low correlation with public stocks.”

An ERISA fiduciary should be extremely careful before putting that sentence into an investment-committee memo.

Because the apparent diversification can be partly an artifact of how private assets are valued.

Public stocks are marked every trading day. Private-equity holdings may be valued periodically using estimates, models and manager judgments. Market movements therefore don’t necessarily appear immediately in reported NAV.

The result can be:

Smoothed NAV → artificially low measured volatility → artificially low measured correlation → artificially attractive Sharpe ratio → apparent diversification benefit.

The economic risk hasn’t necessarily disappeared.

The ruler changed.

And there is unusually strong independent support for that proposition.

Even T. Rowe Price warns that smoothing distorts diversification statistics

This isn’t merely an argument made by private-equity critics.

T. Rowe Price’s analysis of private-asset diversification acknowledges that appraisal-based valuations and the absence of mark-to-market pricing can make private-asset performance incomparable with public assets.

Its conclusion is particularly important: smoothed results do not accurately represent the actual volatility and correlation characteristics of private investments. Its analysis found that, over longer periods that diminish the smoothing effect, private-equity volatility was comparable with large-cap public equities over one-year periods and higher over rolling three-year periods.

That is potentially devastating to the simplistic TDF sales pitch.

Suppose an optimizer is given:

Input	Public equities	Reported PE
Standard deviation	18%	10%
Correlation	1.00	.50
Expected return	8%	10%

Of course the optimizer wants PE.

But suppose economic reality after correcting for stale pricing looks more like:

Input	Public equities	Unsmoothed PE
Standard deviation	18%	20%
Correlation	1.00	.85
Expected return	8%	10%

The alleged diversification miracle largely disappears.

Garbage risk statistics in → fiduciary-looking efficient frontier out.

---

The academic evidence is even stronger

Boyer, Nadauld, Vorkink and Weisbach published an important Journal of Finance paper using PE secondary-market transactions.

Their conclusion:

“Net asset values are too smooth.”

They found that NAVs fail to reflect changes in discount rates and warned that ignoring that variation can result in misallocation of capital.

That goes directly to the 401(k) issue.

The relevant fiduciary question isn’t:

“What standard deviation did the PE manager report?”

It is:

“What would the volatility, beta and correlation look like if these assets were continuously market-priced like everything else in the target-date fund?”

A fiduciary who doesn’t ask that question could be comparing apples with periodically appraised oranges.

Recent NBER research provides another warning. Ercan, Kaplan and Strebulaev found that the history of private-equity interim valuations contains information beyond the latest reported valuation; greater valuation staleness and repeated markdowns help predict subsequent outcomes.

In other words, the latest NAV isn’t necessarily the whole risk story.

---

Bailey and López de Prado: serial correlation can hide enormous downside risk

David Bailey and Marcos López de Prado provide another piece of this puzzle. https://lnkd.in/eqvbp7qC

Their research examined the consequences of treating serially correlated investment returns as though returns were independent.

Their finding was remarkable:

Ignoring serial correlation can underestimate downside potential by as much as 70%.

Their paper concerns hedge-fund strategies rather than specifically PE target-date funds, so I would not claim they proved that PE risk is understated by 70%.

But the methodological warning is directly relevant.

When smoothed or stale marks create serial correlation, conventional risk measures can badly mischaracterize the underlying risk.

An ERISA fiduciary therefore shouldn’t accept a consultant’s standard deviation, Sharpe ratio or correlation matrix without asking:

How were the private-market returns adjusted for smoothing and serial correlation?

If the answer is they weren’t, the supposedly sophisticated asset-allocation model may be built on a fundamental statistical mismatch.

---

This is the same “Risk Illusion” we identified with TIAA

The structure closely resembles the problem I previously identified with TIAA’s target-date modeling.

TIAA’s annuity doesn’t fluctuate like a bond fund because there isn’t a continuously traded security producing a market price every day. The crediting process and insurance structure smooth what participants see.

That can make an illiquid contractual asset look statistically safer than a liquid security.

The CommonSense analysis called this “fake volatility”: risk can be transferred or hidden without disappearing.

Private equity potentially brings the same problem to the equity side of the glidepath.

Put the two together and a next-generation TDF could theoretically contain:

Public Stocks + Bonds + Private Equity + Private Credit + Real Estate + Annuities

and report beautifully diversified historical statistics.

But some of the apparent diversification may arise precisely because the assets aren’t being priced on the same basis.

That is not necessarily diversification.

It can be accounting diversification.

---

Why this creates ERISA litigation exposure

This is where the issue gets much more serious.

ERISA doesn’t ask whether a consultant’s PowerPoint produced an attractive efficient frontier.

The fiduciary must undertake a prudent process.

The Department of Labor’s PE guidance specifically recognized that private equity presents greater complexity, longer time horizons, less liquidity, different regulatory/disclosure standards, more complicated valuation and typically higher fees. It said fiduciaries considering PE should conduct an objective, thorough and analytical process, secure sufficient information to understand the investment and its risks, and compare a PE-containing fund against alternatives without PE.

Important current-law qualification: the Biden-era 2021 Supplemental Statement was rescinded in August 2025, so it should not be presented as current DOL policy. But its description of the underlying valuation/liquidity problems—and the underlying fiduciary principles—remains historically useful evidence of risks regulators specifically identified.

The original 2020 Information Letter itself did not authorize standalone participant PE investments; it addressed PE as a component of professionally managed asset-allocation funds.

That makes the target-date fund exactly where this fight is likely to occur.

The plaintiff’s discovery request practically writes itself

Imagine the investment committee approves a TDF containing 10% PE because the consultant says PE reduces volatility and improves diversification.

Five years later participants sue.

Plaintiffs ask for:

1. Every correlation matrix presented to the committee.
2. The raw return series underlying those correlations.
3. Reported and unsmoothed PE volatility.
4. The methodology used to correct quarterly/stale valuations.
5. Serial-correlation adjustments.
6. Public-market-equivalent analysis.
7. Secondary-market valuations.
8. Stress-period correlations.
9. The underlying LPAs and side letters.
10. Every analysis comparing the PE TDF with a low-cost liquid TDF without PE.

Then comes the deposition:

Q. You concluded private equity reduced the target-date fund’s risk?

A. Yes.

Q. You knew public equities were priced daily?

A. Yes.

Q. You knew the private investments weren’t?

A. Yes.

Q. What adjustment did you make before comparing their standard deviations and correlations?

A. None.

That’s the problem.

---

The WSJ article raises the fiduciary standard even further

Jason Zweig’s new Wall Street Journal article warns ordinary investors about precisely the characteristics that can disappear behind the PE-diversification sales pitch: infrequent and potentially dubious valuations, limited liquidity, high and variable fees, adviser incentives and the complexity of private funds.

Zweig recommends asking detailed questions and getting the answers in writing.

Jason Zweig — What to Ask When Your Adviser Pushes Private Funds

That creates an uncomfortable ERISA question:

If the Wall Street Journal says a retail investor should question the valuation and liquidity of a $50,000 private investment, what excuse does an ERISA fiduciary have for accepting a consultant’s correlation matrix before putting $500 million of workers’ retirement money into PE?

---

And then we reach the CIT

This is where your recent contract work and the risk-smoothing argument come together.

A conventional mutual fund provides investors a registered security with substantial standardized public disclosure.

The emerging private-market TDF can instead look like:

401(k)
↓
Target-Date CIT
↓
Private-Market CIT / Feeder
↓
Conduit / Alternative Investment Vehicle
↓
Private-Equity Partnership
↓
Portfolio Companies

Your recent CommonSense article argues that these structures can provide much less participant visibility into the underlying contracts and economics.

CommonSense — SEC Mutual Fund Standards Are Slipping, But Not Fast Enough for Private Equity

I would make one legal distinction very clear: a state-regulated CIT does not itself legalize bad valuation, an imprudent investment process, or an ERISA prohibited transaction.

Its importance to your thesis is different:

The CIT can obscure the evidence necessary to test the sales pitch.

The participant sees:

“2055 Target Retirement Fund.”

The fiduciary may be shown:

“Lower volatility + lower correlation + higher expected return.”

But underneath those statistics can sit bespoke PE contracts, GP valuations, feeder vehicles, different liquidity rights, leverage, affiliated fees and other contractual economics that aren’t apparent from the TDF’s name or headline statistics.

That makes your contract article the second half of this story.

CommonSense — The Contracts Private Equity Doesn’t Want 401(k) Participants to See

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Anderson v. Intel makes this especially dangerous

Anderson v. Intel Corporation Investment Policy Committee is about whether an ERISA underperformance complaint must allege a “meaningful benchmark” to survive dismissal. The underlying Intel plans invested through target-date/global-diversified funds containing alternative investments, including PE and hedge funds.

Now combine that litigation issue with private-market smoothing.

The PE industry can potentially argue on the front end:

“Our low correlation proves PE reduces risk.”

And defendants can argue after litigation begins:

“Plaintiff hasn’t identified an appropriate meaningful benchmark.”

But how does the participant construct the correct benchmark if the underlying contracts, valuations, leverage and actual economic exposures aren’t publicly available?

That is why valuation opacity + contractual secrecy + meaningful-benchmark pleading requirements could become an extraordinarily powerful defense mechanism.

Your argument shouldn’t be that every low correlation is “fake.”

It should be harder to rebut:

A fiduciary cannot prudently rely on reported PE correlation and volatility without determining whether stale or discretionary valuations materially suppress those statistics.

---

The fiduciary litigation test

I would end the piece with this.

Before a fiduciary accepts the statement “private equity reduces TDF risk,” demand six numbers:

Reported PE volatility.
Unsmoothed PE volatility.
Reported stock/PE correlation.
Unsmoothed stock/PE correlation.
Stress-period correlation.
Secondary-market discount to reported NAV.

Then demand the methodology and underlying data in writing.

If the PE manager won’t provide them, don’t let the consultant put “diversification benefit” in the investment committee minutes.

Because after the lawsuit is filed, that phrase may become Exhibit A.

Bottom line

Private equity does not become safer because its price moves less often.

An asset that isn’t marked doesn’t have zero volatility. It has unreported volatility.

And a target-date fund doesn’t become diversified merely because a spreadsheet combines daily-priced public securities with quarterly manager-valued private assets and produces a low correlation coefficient.

For an ERISA fiduciary, mistaking valuation smoothing for risk reduction isn’t sophisticated diversification. It is potentially discoverable evidence of a flawed fiduciary process.

CommonSense — Private Equity Business Model Depends on Secrecy, Fake Benchmarks and Fiduciary Illusions

THE CONTRACTS PRIVATE EQUITY DOESN’T WANT 401(k) PARTICIPANTS TO SEE

SEC Mutual Fund Standards Are Slipping — But Not Fast Enough for Private Equity, Which Is Turning to State-Regulated CITs – 2 roads into your 401(k)

A Complaint-Style ERISA Analysis of Blackstone, Apollo, Carlyle, Vista, Oak Hill, New Mountain and KKR Partnership Agreements

Preliminary Statement

1. Private equity’s campaign to enter America’s 401(k) plans is commonly presented as a debate about asset allocation. It is not.
2. The more important question is contractual:

What exactly is the retirement plan buying?

3. Private-equity managers can argue that the products eventually sold through 401(k) target-date funds will be different from the institutional private-equity partnerships that have historically been sold to public pension funds.
4. There is a simple way to test that assertion.

Produce the contracts.

5. The historical contracts reviewed here include limited partnership agreements involving Blackstone, Apollo, Carlyle, Vista Equity Partners, Oak Hill, New Mountain and KKR. They are not hypothetical contracts reconstructed by critics. They are actual institutional private-equity agreements.
6. Many have been publicly available through the Naked Capitalism Document Trove for roughly a decade. The Trove describes its collection as including agreements obtained from Pennsylvania’s public contracting records, Kentucky public pensions and other authorized sources and notes the industry’s extraordinary efforts to maintain LPA confidentiality. https://trove.nakedcapitalism.com/
7. The contracts themselves demonstrate that secrecy is not incidental. Vista’s agreement, for example, says the agreement is confidential, may not be reproduced or transmitted, and may not be disclosed without Vista’s prior written consent.
8. Blackstone Capital Partners V goes even further on its cover: “HIGHLY CONFIDENTIAL & TRADE SECRET.”
9. Carlyle Partners V similarly labels its agreement “TRADE SECRET AND STRICTLY CONFIDENTIAL.”
10. Yet these agreements have been available for public inspection for years.
11. That history raises an obvious question as private equity seeks access to trillions of dollars of ERISA retirement savings:

If the contracts are suitable for workers’ retirement money, why shouldn’t the workers whose money is invested be allowed to read them?

---

COUNT I

PRIVATE EQUITY’S CONTRACTS EXPRESSLY CONTEMPLATE AVOIDING ERISA PLAN-ASSET STATUS

12. The most important provisions in these documents may be the provisions discussing ERISA itself.
13. Apollo Investment Fund VIII defines “Significant Benefit Plan Investment” as ownership by ERISA investors of 25% or more of the value of any class of equity interests in the partnership or certain conduit vehicles.
14. Apollo then states its objective expressly. The General Partner will use reasonable best efforts to conduct the partnership so its assets will not be treated as Plan Assets, including by:

• qualifying for the VCOC exception;
• limiting ERISA investors to avoid “Significant Benefit Plan Investment”; or
• using another statutory or regulatory exception.

15. Carlyle’s agreement is equally revealing. Where benefit-plan investors own less than 25% of each equity class, the GP may certify that the partnership’s assets should not constitute ERISA plan assets.
16. Blackstone defines a benefit-plan-investor entity by reference to the same 25% threshold.
17. Blackstone also promises to use reasonable best efforts to maintain VCOC treatment and to structure alternative investment vehicles so that their assets do not constitute the plan assets of ERISA investors.
18. This distinction is critical.
19. Keeping ERISA investment below the relevant threshold does not mean the ERISA plan fiduciary that purchases the investment ceases to owe fiduciary duties.
20. Rather, the structure seeks to prevent ERISA from “looking through” the partnership interest and treating the partnership’s underlying assets as plan assets—with the resulting fiduciary and prohibited-transaction consequences for persons exercising authority over those assets.
21. In other words:

ERISA money can enter the front door while the private-equity manager seeks to keep ERISA’s fiduciary rules from following that money through the door.

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COUNT II

THE CONTRACTS SHOW THAT THIS IS AN INTENTIONAL STRUCTURAL OBJECTIVE, NOT AN ACCIDENT

22. These are not boilerplate references buried in definitions.
23. The agreements contain elaborate mechanisms for dealing with the possibility that ERISA might apply.
24. Vista permits a Limited Partner to be forced to withdraw if its participation could cause partnership assets to be characterized as employee-benefit-plan assets.
25. New Mountain similarly provides mechanisms for disposing of an ERISA investor’s interest to prevent the fund’s assets from becoming “plan assets.”
26. Blackstone restricts transfers that could cause partnership assets to become plan assets or cause the General Partner to become an ERISA fiduciary.
27. Apollo goes further still.
28. Its agreement permits an ERISA investor to opt out where participation could constitute a prohibited transaction under ERISA §406 or Code §4975 or cause partnership assets to become Plan Assets.
29. These provisions constitute powerful evidence of something that is often missing from the public discussion about “democratizing” private equity:

The private-equity industry knows exactly where the ERISA line is and drafts sophisticated contractual machinery around it.

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COUNT III

THE CONTRACTS CREATE MULTIPLE VEHICLES BETWEEN THE RETIREMENT INVESTOR AND THE ACTUAL ASSETS

30. The agreements also demonstrate why the structure of a future 401(k) private-equity product matters as much as its label.
31. Carlyle expressly authorizes parallel investment entities and feeder funds.
32. Apollo authorizes Alternative Investment Vehicles and still another category called a “Conduit Vehicle.”
33. Most strikingly, Apollo says that a Conduit Vehicle need not be structured to meet the VCOC exception or avoid Significant Benefit Plan Investment. Instead, the arrangement can deem the ERISA investor to have directed the investment and deem the vehicle’s manager a custodian rather than an ERISA fiduciary.
34. Blackstone contains a comparable concept involving an “Intermediate Entity.” It acknowledges that the intermediate entity’s assets may themselves constitute plan assets while stating that its manager is nevertheless “not intended to be a fiduciary” with respect to those assets.
35. These provisions deserve enormous scrutiny before analogous structures are placed beneath a 401(k) target-date fund.
36. A participant may see:

Target Date 2050

37. Underneath it may sit:

Target-Date CIT → Private-Market CIT/Feeder → Conduit/Intermediate Vehicle → PE Partnership → Portfolio Company.

38. That complexity isn’t merely operational. Each additional entity can affect regulatory status, valuation, liquidity, disclosure and who is—or is not—treated as exercising fiduciary authority.
39. This is why the current movement toward state-regulated CIT structures deserves examination. SEC mutual funds still face federal liquidity, valuation, disclosure and governance constraints. More complicated private-market arrangements can instead be layered beneath CITs that participants may find extraordinarily difficult to penetrate.

---

COUNT IV

THE CONTRACTS CONTAIN THE VERY CONFLICTS AND AFFILIATED PAYMENTS ERISA IS SUPPOSED TO POLICE

40. These agreements aren’t simply passive investment mandates.
41. Blackstone VI expressly recognizes that Blackstone and its affiliates may receive financial-advisory fees, monitoring fees, organization and financing fees, divestment fees, directors’ fees and other compensation involving companies in which the partnership invests.
42. Another Blackstone VI provision says its adviser or affiliates may receive break-up and topping fees, monitoring and director fees, organization, financing and divestment fees and similar compensation.
43. Apollo’s definition of “Special Fees” is almost a catalog of potential conflicts:

consulting fees, monitoring fees, investment-banking fees, advisory fees, breakup fees, directors’ fees, closing fees, transaction fees and Bridge Fees, including noncash consideration such as options and warrants.

44. Oak Hill’s agreement expressly contemplates transactions involving partners and affiliates, subject to contractual protections and Advisory Board approval for material transactions.
45. None of those clauses standing alone proves an ERISA violation in a particular future 401(k) investment.
46. They prove something different and highly relevant:

Affiliated transactions and multiple streams of compensation are built into the contractual architecture of institutional private equity.

47. A prudent ERISA fiduciary therefore cannot responsibly approve a private-equity allocation by reviewing only the headline management fee.
48. The fiduciary must understand the entire economic relationship among the fund, GP, affiliates, portfolio companies, intermediaries, consultant, trustee and plan.

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COUNT V

CUNNINGHAM v. CORNELL MAKES THOSE TRANSACTIONS MORE IMPORTANT, NOT LESS

49. In Cunningham v. Cornell University, the Supreme Court unanimously held in 2025 that ERISA §406(a)(1)(C) defines the prohibited transaction and that the §408 exemptions operate as affirmative defenses rather than additional elements participants must plead.
50. That does not automatically make every private-equity fee or affiliated transaction prohibited.
51. But it makes contractual transparency extraordinarily important.
52. If plan assets are used in transactions involving parties in interest, the fiduciary must understand the transaction sufficiently to determine whether ERISA’s prohibited-transaction rules are implicated and, where relevant, whether an exemption can be established.
53. A fiduciary cannot perform that analysis from a marketing presentation saying:

“Private Equity — 10% Allocation.”

54. The contract matters.
55. The affiliates matter.
56. The fees matter.
57. The compensation flowing from portfolio companies matters.
58. The intermediate entities matter.
59. And the actual legal relationships matter.

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COUNT VI

THE CONTRACTS THEMSELVES UNDERMINE THE ARGUMENT THAT PARTICIPANTS DON’T NEED THEM

60. Private equity traditionally insists that LPAs are confidential.
61. KKR’s agreement provides a particularly revealing compromise.
62. A governmental plan may publicly disclose certain high-level information—commitments, capital drawn, distributions, reported value, IRRs, multiples and management fees—but the agreement still separately maintains confidentiality restrictions over broader partnership information.
63. That distinction matters.
64. Knowing that a pension invested $100 million and paid a reported management fee is not the same as knowing:

• what affiliated transactions are permitted;
• who controls valuation;
• what additional fees affiliates receive;
• what leverage is permitted;
• what side arrangements exist;
• what withdrawal rights exist;
• what indemnification protects the GP;
• what happens if ERISA plan-asset status arises; and
• what vehicles can be inserted between investor and asset.

65. Those questions require the governing documents.

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COUNT VII

ANDERSON v. INTEL EXPOSES THE PLEADING TRAP CREATED BY PRIVATE-EQUITY SECRECY

66. This becomes particularly important in Anderson v. Intel Corporation Investment Policy Committee, now before the Supreme Court.
67. Intel’s retirement funds invested in hedge funds and private equity. The Ninth Circuit nevertheless rejected Anderson’s prudence claim, reasoning that he had not identified an adequate “meaningful benchmark” and emphasizing that he supposedly had sufficient information about Intel’s underlying investments to develop comparators.
68. The Supreme Court granted review on January 16, 2026.
69. The case presents a potentially perverse result when applied to the next generation of private-market 401(k) products.
70. Wall Street could construct an investment whose underlying contracts are:

private, bespoke, illiquid, model-valued, layered through multiple vehicles and protected by confidentiality provisions.

71. Then, when a participant challenges the investment, defendants could demand that the participant identify a nearly identical “meaningful benchmark” before discovery.
72. But the information necessary to identify the benchmark—or to show why the investment was imprudent—may reside in documents the participant isn’t permitted to see.
73. That risks turning opacity itself into a pleading defense.
74. The Ninth Circuit said plaintiffs shouldn’t be required to plead facts “solely” in defendants’ possession, but simultaneously concluded that Anderson had enough information to identify comparators.
75. Private-equity LPAs expose why that assumption becomes increasingly problematic.
76. Knowing the name of the PE fund isn’t knowing the investment.
77. The investment is the contract.

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COUNT VIII

THE WALL STREET JOURNAL HAS NOW ASKED RETAIL INVESTORS TO DEMAND INFORMATION 401(k) PARTICIPANTS MAY NEVER RECEIVE

78. The irony became even sharper in August 2026.
79. Jason Zweig’s recent Wall Street Journal article warns individual investors considering private funds to investigate fees, liquidity restrictions, valuation reliability, adviser incentives, distributions and the adviser’s expertise—and recommends getting answers in writing.
80. Zweig reports that advisers could move approximately $2 trillion of client money into private funds through 2030 and describes the investments as complex and opaque, with high and variable fees, potentially questionable valuations and restricted liquidity.
81. That creates an extraordinary double standard.
82. The Wall Street Journal is effectively telling an individual investor:

Ask what you’re buying.
Ask what it costs.
Ask who gets paid.
Ask how it is valued.
Ask how you get out.
Get the answers in writing.

83. Yet a 401(k) participant whose fiduciary invests retirement savings through a target-date CIT may receive considerably less information about the underlying private-equity contract.
84. If those questions are appropriate before an individual puts $50,000 into a private fund, they are indispensable before an ERISA fiduciary places $500 million of workers’ retirement savings into one.

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COUNT IX

“OUR 401(k) CONTRACT WILL BE DIFFERENT” IS NOT AN ANSWER

85. Private-equity managers will undoubtedly respond that these agreements are old institutional contracts and that future 401(k) products will contain different protections.
86. Good.
87. Show us the new contracts.
88. The existence of historical LPAs does not prove that every future 401(k) PE agreement will contain identical provisions.
89. It does establish the appropriate baseline for due diligence.
90. A fiduciary considering a new PE vehicle should compare the proposed 401(k) contract provision-by-provision against the manager’s traditional institutional LPA.
91. The fiduciary should identify exactly what changed:

Historical PE provision	Required 401(k) inquiry
Keep benefit-plan ownership below plan-asset threshold	Has this survived?
VCOC exemption	Is the manager still avoiding look-through ERISA fiduciary status?
Alternative investment vehicles	What entities can participant money be moved into?
Feeder/conduit vehicles	Who is fiduciary at each level?
GP-controlled valuation	Who independently verifies NAV?
Monitoring/transaction/advisory fees	Who receives them and what offsets exist?
Affiliate transactions	Are they permitted? Under what safeguards?
Borrowing/guarantees	What leverage exists at every level?
Long lockups/transfer restrictions	How does the TDF provide daily participant liquidity?
Confidentiality	Can participants obtain the actual governing agreement?
ERISA withdrawal provisions	What happens if plan-asset status changes?
Indemnification/exculpation	Who bears the economic cost of misconduct?

92. If the industry says those provisions have disappeared, disclosure will establish that fact.
93. If it refuses to disclose the agreement, the fiduciary should not simply assume they disappeared.

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COUNT X

COMPLEX CIT STRUCTURES CAN MAKE THE CONTRACT HARDER TO FIND—THEY DO NOT MAKE THE CONTRACT DISAPPEAR

94. The emerging 401(k) structure may create several levels between participant and PE manager.
95. As discussed in the CommonSense analysis of the two emerging roads into 401(k)s, SEC mutual funds face public filings, liquidity regulation, valuation requirements and Investment Company Act governance. Some emerging private-market products instead use CITs and underlying vehicles. CommonSense: “SEC Mutual Fund Standards Are Slipping — But Not Fast Enough for Private Equity”
96. The critical question is therefore not merely:

“Does the TDF contain private equity?”

97. It is:

“Show us every contract underneath the TDF.”

98. Follow the participant’s dollar:

401(k) Plan
↓
Target-Date CIT
↓
Private-Market CIT / Feeder
↓
Conduit / Alternative Investment Vehicle
↓
Private-Equity Partnership
↓
Portfolio Company

99. Then identify at every level:

Who is the fiduciary?
Who values the asset?
Who receives compensation?
Who can transact with affiliates?
Who controls liquidity?
Who can borrow?
Who can pledge assets?
Who can change the structure?
And which entity is deliberately structured so that ERISA does not look through to its assets?

---

PRAYER FOR RELIEF

DISCLOSE THE CONTRACT BEFORE INVESTING THE RETIREMENT MONEY

100. These historical agreements do not establish that private equity can never be prudently included in an ERISA plan.
101. They establish why no ERISA fiduciary should be permitted to rely on the words “private equity” as though they describe a standardized investment product.
102. They do not.
103. The economic investment is inseparable from its contractual terms.
104. Before investing participant assets, an ERISA fiduciary should obtain and analyze the complete LPA, subscription agreement, side letters, advisory agreement, fee-offset provisions, valuation provisions, credit arrangements, affiliated-transaction provisions, alternative-vehicle documents and ERISA provisions.
105. And participants challenging that decision should not be placed in the impossible position of having to plead what those secret contracts contain before they are allowed to obtain them.
106. The documents reviewed here reveal the fundamental contradiction in the private-equity industry’s push into defined-contribution retirement plans:

Private equity wants ERISA money.

Its own contracts show how carefully it has historically structured itself to prevent ERISA from following that money into the fund.

107. That does not by itself make the investment illegal.
108. But it makes disclosure, fiduciary due diligence and discovery indispensable.
109. And after Cunningham, with Anderson now before the Supreme Court, the governing contracts may become some of the most important documents in the next generation of ERISA private-equity litigation.

The simplest fiduciary test

Don’t tell participants the new 401(k) private-equity contract is different.

Show them.

For decades, SEC-registered mutual funds represented something close to the gold standard for retirement-plan investment transparency.

Daily NAV. Market-value accounting. Public filings. Liquidity requirements. Independent boards. Audited financial statements. Restrictions on affiliated transactions. And a federal regulator looking over the industry’s shoulder.

Wall Street increasingly wants to put private equity, private credit, private real estate and insurance contracts into 401(k) target-date funds.    The SEC has loosened enough to let some of this happen.  But apparently not enough.

That may help explain why some of the industry’s most ambitious new private-market target-date products are being built as state-regulated Collective Investment Trusts rather than SEC mutual funds.

And the history of stable value tells us why this matters.

---

In 2004, the SEC wouldn’t swallow a synthetic stable-value mutual fund

I know these products because I worked with synthetic stable value and 4 specific mutual funds.

The old structure was relatively simple:

SEC mutual fund  

Primarily 95%-100% mostly liquid fixed-income securities

Around 1% to 5% bank/insurance-company wrap contracts

The underlying bonds generally had market prices and could generally be sold. The wrap contracts allowed participants to transact at contract value. Yet that was enough to make the SEC uncomfortable.

A 2004 Scudder filing disclosed:

“The staff of the Securities and Exchange Commission has inquired as to the valuation methodology for Wrapper Agreements utilized by ‘stable value’ mutual funds…”

The problem wasn’t that the bond portfolio was full of illiquid junk.

It was accounting and valuation.

Scudder disclosed that if the SEC rejected the valuation treatment of the wrappers, the fund could no longer maintain its stable NAV.

And that’s essentially what happened. On November 17, 2004, Scudder PreservationPlus eliminated its wrapper agreements and became a fluctuating-NAV short-term bond fund.

The stable-value mutual-fund experiment disappeared.

I previously called this the SEC quietly killing stable-value mutual funds.  https://commonsense401kproject.com/2026/06/09/the-sec-quietly-killed-stable-value-mutual-funds-in-2004-and-that-tells-you-everything-about-private-equity-fixed-annuities-and-prohibited-transactions-in-401ks/

Twenty-two years later, compare that regulatory skepticism with what’s being permitted today.

---

Somehow a building can now have a daily “fair value”

The SEC hasn’t abandoned fair value.

But it has modernized how fair value can be determined.

SEC Rule 2a-5 allows investments without readily available market quotations to be assigned a good-faith fair value using established methodologies, inputs and assumptions. The valuation function can also be delegated to a valuation designee, typically the investment adviser, subject to board oversight and other requirements.

That has enormous implications for private assets.

Consider a private office building.

There is no NYSE closing price at 4 p.m.

Instead:

Private building >appraisal/model>$100 million “fair value”>private-real-estate fund NAV>target-date fund NAV>participant gets a daily price.

Nothing about putting a daily number on the building makes the building daily liquid.

Yet the accounting framework can produce a daily NAV.

Compare that with 2004

The irony is difficult to miss.

	2004 Synthetic Stable Value	2026 Private-Market TDF
Underlying asset	Mostly bonds	Private loans / buildings / PE
Observable market prices	Mostly yes	Often no
Actual underlying liquidity	Relatively high	Low to extremely low
Daily participant liquidity	Yes	Yes at TDF level
Valuation judgment	Mainly wrapper problem	Private-asset models/appraisals
SEC treatment	Structure disappeared after valuation challenge	Increasingly accommodated through fund structures

That looks like a substantial relaxation in practical terms.

But apparently it’s still not enough for private equity.

---

Franklin shows how far the SEC will go

Franklin Templeton’s new Retirement Advantage Plus target-date mutual funds are particularly instructive.

They are SEC-registered mutual funds.  And Franklin says they will provide private-market exposure while maintaining daily liquidity.

But look at what Franklin actually did.  It didn’t simply drop a conventional 10-year private-equity LP into the TDF.

Instead:

Franklin Retirement Advantage Plus SEC mutual fund

Franklin BSP Lending Fund>registered interval fund>private credit

and

Clarion Partners Real Estate Income Fund>registered interval fund>private real estate.

Franklin says private-market allocations generally range from only about 2% to 8% over the glide path. That’s revealing. The private assets remain illiquid.

The TDF remains liquid largely because roughly 92%–98% isn’t allocated to those private-market sleeves.

---

SEC liquidity rules still have teeth

An ordinary open-end mutual fund generally cannot simply load itself with illiquid assets.

Rule 22e-4 prohibits a fund from acquiring additional illiquid investments if doing so would leave more than 15% of net assets in illiquid investments. It also imposes liquidity-risk-management requirements.

So Franklin uses another registered vehicle as the middle layer.  That’s clever.

Daily-liquid TDF>limited-liquidity interval fund>illiquid asset.

The private loan hasn’t become liquid.  The building hasn’t become liquid.

The illiquidity has been pushed down another level.

---

But Private Equity wants more

Now look at what’s happening in the CIT world. 2% to 8% is not enough.

Great Gray’s Panorix Target Date Series isn’t an SEC mutual fund.

Great Gray explicitly tells investors that its funds are collective investment funds exempt from registration under the Investment Company Act of 1940 and Securities Act of 1933.

And what is Panorix designed to hold?  Private equity and private credit.

BlackRock supplies the custom glidepath and public/private-market investment components, while Wilshire oversees implementation and liquidity management.

The disclosed structure includes BlackRock private-equity exposure and a private-credit CIT trusteed by Goldman Sachs Trust Company, N.A.

But the target-date CIT sitting at the top is:

Great Gray Trust Company — Nevada.

That’s the part retirement fiduciaries should be asking about.

---

If SEC standards have become more accommodating, why go to Nevada?

That’s a better question than whether private equity is technically “allowed” in a mutual fund.

Clearly some private exposure can be engineered into an SEC structure.

Franklin just demonstrated it. But look at the compromises Franklin makes:

small 2%–8% private allocation registered interval funds limited private-market sleeves

SEC fair-value rules

SEC liquidity rules

SEC filings

Investment Company Act governance

public expense disclosures.

Now compare that with the ambition of private-equity managers.

They don’t necessarily want 2%.

They want private markets to become a permanent asset class in the 401(k) glidepath.

And they would presumably prefer to use products resembling the institutional contracts they already sell to pension funds:

PE partnerships

private-credit funds

capital calls

GP valuations

subscription lines

NAV financing

carried interest

side letters

long lockups

limited secondary markets.

Those contracts weren’t designed for SEC mutual funds.

---

The regulatory race may therefore look like this

Regulatory wrapper	What Wall Street can currently accomplish	Problem for private markets
SEC open-end mutual fund	Small private allocations increasingly possible	15% illiquid limit, daily liquidity, public disclosure, Rule 2a-5 valuation
SEC TDF + interval fund	Franklin gets PC/RE into TDF at ~2%–8%	Extra wrapper; interval-fund constraints; SEC oversight remains
Pennsylvania CIT	TIAA SIA lifetime-income TDFs; conventional CITs	Detailed state CIT rules, valuation/reporting and unusual liquidity provisions
OCC CIT	Private assets legally possible	Detailed federal CIF regulation and bank examination
Nevada CIT	Emerging PE/PC and complex annuity TDF structures	No comparable detailed CIT-specific operating code that we’ve identified

This does not prove that Nevada permits something the SEC, OCC or Pennsylvania legally prohibit.

The evidence supports a subtler and more troubling question:

Does Nevada allow today’s private-market contracts to be placed into retirement CIT structures with fewer modifications, fewer fund-specific regulatory constraints and less public transparency?

That’s where regulators should be looking.

---

The SEC’s standards may be slipping in exactly the wrong place

The SEC deserves credit for recognizing that not every legitimate asset has an exchange price.

But there’s an enormous difference between:

no exchange price  and  no real market.

Rule 2a-5 says a market quotation is “readily available” only where there is an unadjusted quoted price in an active market for an identical investment. Otherwise, a registered fund can employ a good-faith fair-value process.

That’s reasonable for many securities.  Private equity pushes the concept toward its limit.

Imagine:

PE manager values portfolio company>PE partnership calculates NAV>private-market vehicle incorporates that value>TDF incorporates that NAV>401(k) participant receives daily TDF NAV.

There may be four layers between the participant and the company supposedly worth $1 billion.

Calling the final number “daily NAV” doesn’t create a daily market for the company.

---

The stable-value history makes the inconsistency glaring

In 2004, SEC staff challenged a structure consisting largely of market-priced bonds because it questioned how the relatively small insurance-wrap component was being valued.

Today we’re discussing putting:

private companies

private loans

private real estate

and potentially other difficult-to-value assets inside retirement products.

And rather than forcing all of them through the old mutual-fund transparency standard, the industry increasingly has another option:

Don’t use a mutual fund.

Use a CIT.

And if one state CIT regime is inconvenient?

Choose another state.

---

Follow the contract, not the asset class

The industry debate keeps asking:

Should 401(k) participants have access to private equity?

That’s almost the wrong question.

Ask instead:

Why can’t today’s predominant private-equity contract comfortably survive inside an SEC-registered mutual fund?

Then ask:

What has to be changed to make that same contract fit inside an OCC-regulated CIT?

Then:

What has to change under Pennsylvania’s detailed CIT rules?

And finally:

What has to change if the top-level target-date CIT is governed by a Nevada-chartered trust company?

If the answer gets progressively closer to “nothing,” we may have identified the real attraction.

---

A CommonSense 401(k) Test

Before any private-equity, private-credit, annuity or private-real-estate product enters a 401(k) TDF, every fiduciary should ask one very simple question:

Could this exact contract survive inside an SEC-registered mutual fund?

Not a sanitized version.

Not 2% exposure through an interval fund.

Not an entirely different registered wrapper.

This contract.

Same fees.

Same leverage.

Same GP valuation.

Same liquidity.

Same gates.

Same carry.

Same side letters.

Same affiliated transactions.

Same accounting.

If the answer is no, the next question shouldn’t be:

Which state-regulated CIT can we use instead?

It should be:

Why isn’t it good enough for an SEC mutual fund but good enough for somebody’s 401(k)?

The SEC’s standards have already moved far enough that a daily-liquid mutual fund can obtain exposure to private loans and private buildings through model-valued, limited-liquidity underlying funds.

Apparently that still isn’t flexible enough for the private-equity industry.

And the migration toward state-regulated target-date CITs may tell us more about the future of 401(k)s than all the industry’s talk about “democratizing” private markets combined.

Appendix — The October Intel Case Just Got Bigger

The Supreme Court’s Anderson v. Intel case could determine how difficult it is for 401(k) participants to challenge complicated target-date investments. Intel argues that plaintiffs challenging investment performance need a sufficiently comparable “meaningful benchmark.” The Court granted review in January and the merits briefing is now substantially underway.

That becomes increasingly problematic as target-date funds move beyond ordinary stocks and bonds into private equity, private credit, annuities and other difficult-to-value investments. Great Gray’s Panorix target-date CIT, for example, is expressly designed to incorporate private equity and private credit, while Nuveen’s Pennsylvania-regulated Lifecycle Income CIT embeds TIAA’s Secure Income Account annuity.

The participant may see a simple “Target Date 2050” fund, while underneath could be CITs, private funds, insurance contracts, GP valuations, leverage and multiple layers of fees.

That creates an obvious problem with the meaningful-benchmark requirement:

The more complicated and opaque Wall Street makes the investment, the harder it becomes for a participant to find the supposedly perfect comparable fund.

Indeed, an amicus brief supporting the Intel participants specifically argues that private equity and hedge funds are unusually opaque and difficult to monitor and value.

Don’t Let Opacity Become a Legal Defense

Before requiring a participant to produce the perfect benchmark, require the fiduciary to produce the information necessary to construct one:

Show the contract. Show the fees. Show the leverage. Show the valuation methodology. Show the affiliated transactions. Show the liquidity restrictions.

Then we can talk about benchmarks.

The Supreme Court should be very careful not to create a perverse rule under which the more opaque and complicated a 401(k) investment becomes, the harder it becomes to sue the fiduciaries who selected it.

Complexity should increase fiduciary diligence—not decrease fiduciary accountability.

Who Regulates Your 401(k) CIT? BlackRock, Goldman, Prudential and Lincoln Lead Back to Las Vegas

Many Retirement Plans Still Put Wall Street Over Participants- SCOTUS Intel case key

ERISA Investment Standards Should Be Higher Than Mutual-Fund Standards —Not Lower

Forget the speeches about public service for a moment. Follow the money.

For decades, becoming president could eventually make a family wealthy. Bill and Hillary Clinton made fortunes from books and speeches. George and Laura Bush did well after leaving Washington. Barack and Michelle Obama signed an enormous publishing deal and built a successful media business.

But the Trump family’s wealth accumulation is operating on an entirely different scale.

And perhaps the most remarkable comparison isn’t Donald Trump.

It’s Barron Trump.

A 20-Year-Old Versus Entire Presidential Families

Forbes estimated Barron Trump’s fortune at approximately $150 million, overwhelmingly attributable to the Trump family’s World Liberty Financial crypto venture. Forbes calculated that World Liberty had added more than $1.5 billion to Trump-family fortunes by October 2025, with roughly $150 million attributable to Barron under its ownership assumptions.

Put that number beside Forbes’ estimates for entire former presidential households:

Presidential family/person	Approximate net worth
Donald Trump	$6.4 billion
Jared Kushner	$1.0 billion
Eric Trump	Hundreds of millions
Donald Trump Jr.	~$300 million
Barron Trump	~$150 million
Barack + Michelle Obama	$70+ million
Bill + Hillary Clinton	$45+ million*
George W. + Laura Bush	$40+ million*

*For consistency, these last three figures use Forbes’ published estimates rather than the higher celebrity-net-worth estimates sometimes quoted online.

Forbes currently estimates Donald Trump at about $6.4 billion and Jared Kushner at $1 billion. Forbes estimated the Obamas at more than $70 million, the Clintons at more than $45 million and the Bushes at more than $40 million in its examination of presidential wealth.

So Barron Trump alone is estimated to be worth more than the Obama, Clinton or Bush presidential household under those Forbes estimates.

That deserves considerably more attention than it has received.

The Difference Is How the Money Was Made

The Obamas’ wealth is hardly mysterious.

They earned money as authors, speakers and media producers after Barack Obama left office. Forbes notes that Barack and Michelle Obama’s memoir rights reportedly sold for $65 million in 2017.

George W. Bush made money from books and more than 200 paid speeches after leaving office. Bill Clinton became extraordinarily successful on the speaking circuit after leaving the White House.

Whatever one thinks about former presidents monetizing celebrity, there is an important distinction:

They weren’t president anymore.

The Trump wealth explosion has occurred while Donald Trump returned to political power—and much of it has come from businesses whose economic value can be affected by government policy.

Crypto is the clearest example.

From $50 Million to $300 Million

Consider Donald Trump Jr.

Forbes estimated Don Jr. was worth about $50 million in November 2024.

About a year later?

Approximately $300 million.

Forbes says crypto accounts for much of that sixfold increase.

Eric Trump’s transformation may be even more dramatic.

Before the crypto boom, Forbes estimated that Eric had accumulated roughly $30 million in liquid assets in addition to his Trump Organization income. By September 2025, Forbes valued him at approximately $750 million, although subsequent declines in his American Bitcoin holdings reduced that figure substantially.

And then there is Barron.

Barron’s First Big Business Venture

Barron wasn’t an established real-estate developer.

He wasn’t running a hedge fund.

He wasn’t a Silicon Valley entrepreneur who spent 15 years building a company.

He was a college student.

Yet Forbes estimated his net worth at roughly $150 million by age 19.

The principal reason was World Liberty Financial.

Donald Trump, Don Jr., Eric and Barron became associated with the crypto venture during the 2024 presidential campaign. Forbes reports that Trump-family entities received extraordinarily favorable economics from the enterprise, including rights to a large percentage of token-sale revenues.

Barron’s estimated share included cash generated from token sales, interests connected with World Liberty’s stablecoin business and billions of still-restricted WLFI tokens whose ultimate value remains uncertain.

Forbes therefore arrived at the extraordinary number:

Barron Trump: approximately $150 million.

Before his 20th birthday.

Then There Is Jared Kushner

Jared Kushner provides another revealing comparison.

After leaving the first Trump administration, Kushner established private-equity firm Affinity Partners.

Forbes now estimates Kushner’s personal fortune at approximately $1 billion. Affinity had attracted billions from investors including sovereign wealth funds from Saudi Arabia and Qatar and other Middle Eastern sources.

That means Trump’s son-in-law alone is worth roughly:

14 Obamas.

22 Clintons.

25 Bushes.

Using Forbes’ published household estimates.

This isn’t a normal presidential-family wealth story.

The $10 Billion First Family

Forbes’ September 2025 investigation reached an extraordinary conclusion:

The broader Trump family, including Jared Kushner, had reached an estimated $10 billion in wealth, nearly doubling since the 2024 election. Forbes attributed much of the increase to crypto, alongside international licensing, private equity and other ventures.

That comparison changes the historical discussion.

The traditional controversy was:

Should former presidents become rich because they were president?

The Trump era presents a much bigger question:

Should a sitting president and his immediate family be able to become dramatically richer through businesses operating in industries that the president’s own administration regulates?

Crypto makes that question particularly difficult to avoid.

World Liberty Financial launched shortly before the 2024 election. Trump and his sons became associated with the venture. Trump returned to the White House. The administration pursued a dramatically friendlier approach toward cryptocurrency.

Meanwhile, the family’s crypto wealth exploded.

Forbes itself describes Donald Trump’s current presidency as extraordinarily lucrative and says billions were added to his fortune, largely through crypto.

CommonSense Bottom Line

Forget partisan labels.

Imagine that Chelsea Clinton had accumulated $150 million from a financial product launched around Hillary Clinton’s presidential campaign.

Imagine that George W. Bush’s children had suddenly become worth hundreds of millions from an industry his administration was simultaneously deregulating.

Imagine that Barack Obama’s son-in-law had raised billions of dollars from Middle Eastern governments after serving as a senior White House official.

Republicans would have investigated it.

And they should have.

Democrats should apply exactly the same standard now.

The issue isn’t whether Donald Trump, Eric Trump, Don Jr., Barron Trump or Jared Kushner are legally entitled to make money.

The issue is whether Americans have constructed a political system in which access to presidential power itself can become one of the world’s most valuable family assets.

The numbers make the question difficult to dismiss.

Donald Trump: $6.4 billion.

Jared Kushner: $1 billion.

Don Jr.: roughly $300 million.

Eric Trump: hundreds of millions.

Barron Trump: roughly $150 million.

And Barron hasn’t even turned 21.

Maybe the most valuable Trump family asset isn’t Mar-a-Lago.

Maybe it isn’t Trump Tower.

Maybe it isn’t even crypto.

Maybe it’s the presidency.

Great investigative work by Bloomberg’s Noah Buhayar and Jeff Kao.

The Trump Labor Department has been trying to make it easier for private equity, private credit, crypto and other alternative assets to enter ordinary Americans’ 401(k) plans. The Department’s March proposal would create a new framework—and importantly, a safe harbor for fiduciaries—when alternatives are included in participant-directed retirement plans.

Now Bloomberg has uncovered something remarkable about the supposed public support for that effort:

Some of the people supporting it were dead.

Nearly 12,000 Suspicious Pro-Private-Equity Comments

Bloomberg examined almost 12,000 comments supporting the DOL proposal and found evidence suggesting that a large block may have been manufactured to look like grassroots support.

The contrast is striking.

More than 30,000 comments opposed the proposal. Those submissions generally contained identifying or individualized information—cities, states, email addresses, signatures or other variations.

The roughly 12,000 supportive comments were different. They were concentrated into five virtually identical templates, with essentially identical wording, punctuation, formatting and even line breaks. The five batches arrived in remarkably similar daily quantities between April 29 and May 5—and then stopped.

That looks less like spontaneous public enthusiasm for private equity and more like what Washington calls astroturfing: manufactured grassroots support.

One Problem: Some of the “Supporters” Were Dead

Bloomberg reporters contacted dozens of people whose names appeared on the comments.

They found five cases in which individuals or relatives said the comments had not been submitted by the named person.

One was Danna Oderman, whose name appeared on a May 3 comment supporting the proposal.

There was a rather substantial problem.

She had died the previous December.

Her son Heath Oderman told Bloomberg that the comment was not from his mother and that its language wasn’t language she would have used.

Another supposed supporter was Lyngrid Rawlings, a former educator and U.S. Foreign Service officer who died in 2024. Her daughter told Bloomberg that using her mother’s name this way was deeply disrespectful.

Bloomberg deliberately investigated unusually distinctive names that could be matched with confidence against public records. That means finding five apparent false submissions does not establish that only five of the 12,000 were bogus. It raises the obvious question:

How many of the other 12,000 are real?

Who Created the Campaign?

That may be the most important unanswered question.

Bloomberg contacted more than two dozen investment firms, trade associations and advocacy organizations that publicly supported the DOL initiative.

According to the investigation, none acknowledged knowing who created the five supportive form-letter campaigns.

Bloomberg’s Silla Brush summed up the finding: big money managers have spent more than a year pushing a receptive Trump Labor Department to open 401(k)s further to private equity, private credit and alternatives, while Bloomberg’s examination found evidence that thousands of supportive comments may have been astroturfed.

That deserves considerably more investigation.

Who wrote the five templates?

Who assembled the names?

Who submitted them?

Who paid for it?

And perhaps most importantly: Did any private-equity manager, asset manager, trade association, lobbying firm, public-relations firm or political organization finance or participate in the campaign?

Follow the Money

There is an enormous economic incentive here.

Private-equity and private-credit managers oversee trillions of dollars, but their traditional institutional market—public pensions, endowments and other sophisticated investors—is increasingly questioning fees, valuations, liquidity and performance.

The American defined-contribution system represents an enormous new pool of capital.

Better Markets has made essentially this point in opposing the DOL proposal: private-market investments bring high fees, illiquidity and limited transparency, while the industry has a huge financial incentive to gain access to America’s retirement accounts.

Private credit provides a particularly awkward backdrop. Investors have recently requested redemptions well above quarterly limits at funds associated with BlackRock, Apollo, Ares, Carlyle and Blue Owl.

In other words:

Some sophisticated investors are trying to get money OUT of private markets at precisely the moment Washington is working to put ordinary 401(k) investors IN.

Academics Aren’t Exactly Clamoring for This Either

This also reinforces what we recently wrote in “More Academics Oppose Private Equity in 401(k)s — Clayton and de Fontenay.”

The intellectual case for putting private equity into ordinary participant-directed retirement accounts is far weaker than the industry’s marketing campaign would suggest.

Private equity brings higher fees, illiquidity, valuation problems, leverage, opaque related-party transactions and extraordinarily complicated benchmarking.

And after all that additional risk and expense, the incremental return to the 401(k) participant may be puny at best.

The incremental revenue opportunity for Wall Street?

Enormous.

That asymmetry is what should concern fiduciaries.

CommonSense Bottom Line

The Bloomberg investigation doesn’t prove who manufactured these comments or how many are fraudulent. It establishes something important enough on its own:

The supposed grassroots support for putting private equity into Americans’ 401(k)s is sufficiently questionable that Bloomberg found comments attributed to people who were already dead.

That should trigger scrutiny by DOL’s Inspector General, Congress and anyone reviewing the administrative record supporting this rule.

Before DOL relies upon these comments, it should determine who actually submitted them and who financed the campaign.

And until that happens, DOL certainly shouldn’t cite 12,000 supportive comments as evidence that American workers are clamoring for private equity in their retirement plans.

We aren’t dead.

Our opposition is real.

Our comment is legitimate, publicly available, and backed by years of research on fees, conflicts, valuations, liquidity and fiduciary risk.

As for the dead people supposedly supporting private equity?

One wonders who they voted for.

---

Credit where it is due: outstanding investigative reporting by Noah Buhayar and Jeff Kao of Bloomberg News, with Bloomberg’s Silla Brush highlighting the findings today.

Bloomberg investigation: Trump’s 401(k) Proposal Shows Evidence of Phony Public Support

Related CommonSense: More Academics Oppose Private Equity in 401(k): Clayton and de Fontenay — August 3, 2026.

APPENDIX A: NBC — Private Equity Needs Your 401(k) Money

A timely new NBC News investigation provides important context for the private-equity industry’s push into 401(k)s:

“Private equity needs new investors. It’s targeting your 401(k).”

That may be the most important sentence in the entire debate.

NBC’s reporting focuses on something largely missing from Wall Street’s sales pitch: private equity needs new sources of capital.

The industry’s traditional institutional market is under pressure. Fundraising has slowed, distributions to investors have been weak, portfolio companies have remained trapped in funds longer, and institutional investors increasingly face their own liquidity and allocation constraints.

Enter the American 401(k).

The defined-contribution system represents trillions of dollars of potential new capital—much of it arriving automatically every two weeks through payroll deductions.

For private-equity managers, that’s an extraordinarily attractive new market.

Is This About Helping Workers—or Helping Private Equity?

The industry presents private assets in 401(k)s as “democratizing” investments previously available primarily to institutions and wealthy investors.

NBC’s framing suggests another way to look at it:

Private equity needs investors. 401(k)s contain an enormous pool of investors.

That distinction matters.

The traditional institutional investors private equity has served for decades have professional staffs, investment consultants, attorneys and substantial negotiating power. Even they have struggled with private-equity fees, valuations, liquidity, transparency and complicated partnership agreements.

Individual 401(k) participants have none of those advantages.

Yet the Trump Labor Department is working to make it easier to move these investments downstream into participant-directed retirement plans.

Wall Street’s Dream Customer: Automatic Contributions and Limited Liquidity

There is another reason 401(k)s could be especially valuable to private markets.

401(k) contributions are remarkably sticky.

Workers contribute paycheck after paycheck. Employers frequently contribute matching dollars. Participants often remain invested for decades.

That potentially gives private-equity and private-credit managers something they badly want:

a huge, recurring and relatively stable source of capital.

And the fee opportunity is dramatically larger than in today’s low-cost 401(k) marketplace.

A participant can buy broad public-market exposure for only a few basis points. Private-market investments can involve management fees, carried interest, underlying fund expenses, transaction costs and layers of intermediary expenses that are difficult for participants—and sometimes even fiduciaries—to see.

The question isn’t merely whether private equity can be placed inside a 401(k).

The fiduciary question is:

Why does the participant need it?

If an inexpensive diversified public-market portfolio already provides liquidity, daily pricing, transparency and strong long-term returns, the burden should be on Wall Street to demonstrate that the additional fees, leverage, illiquidity and valuation risk produce a meaningful net benefit to participants.

Not merely a new revenue stream for asset managers.

NBC Makes the Bloomberg Story More Important

That’s the connection to the Bloomberg investigation discussed above.

Bloomberg raises serious questions about whether some of the apparent public enthusiasm for private equity in 401(k)s was real.

NBC helps explain why generating enthusiasm would be so valuable.

The potential prize isn’t a small new investment product.

It’s access to trillions of dollars of American retirement savings.

That doesn’t prove who was responsible for the suspicious comments Bloomberg identified. It does make determining who organized and financed those comments considerably more important.

CommonSense Bottom Line

NBC has identified the issue that 401(k) fiduciaries should keep front and center:

Private equity needs new investors.

That is very different from saying:

401(k) participants need private equity.

Before Washington transforms America’s retirement system to solve Wall Street’s fundraising problem, fiduciaries should demand evidence that private equity actually improves participant outcomes after fees, after illiquidity, after leverage and after risk.

Until then, perhaps the simplest question is the best one:

Is private equity being brought into 401(k)s because workers need private equity—or because private equity needs workers’ money?

Read: NBC News, Private equity needs new investors. It’s targeting your 401(k). https://www.nbcnews.com/business/personal-finance/private-equity-needs-new-investors-s-targeting-401k-rcna588334

APPENDIX B: Follow the Money — Schwarzman’s 401(k) “Dream,” Trump and McConnell

There is another name worth adding to the story of Washington’s sudden enthusiasm for putting private equity into workers’ 401(k)s:

Stephen Schwarzman.

The billionaire co-founder and CEO of Blackstone didn’t recently discover the 401(k) market.

He has apparently been dreaming about it for years.

Back in 2017, Schwarzman told investors:

“In life, you have to have a dream.”  He then described that dream as greater retail access to alternative investments and said many people were not permitted to put them into “retirement vehicles.   He concluded that a regulatory change (from the new Trump Administration) would be a “huge opportunity for the firm.

That dream is now remarkably close to becoming government policy.

From Schwarzman’s Dream to Trump’s DOL

The chronology deserves attention.

2017: Schwarzman publicly describes access to retirement assets as a private-equity industry “dream.”

2020: The first Trump Labor Department issues guidance making it easier for professionally managed 401(k) investment options to contain private equity.

2025: President Trump signs an executive order directing regulators to facilitate alternative investments—including private equity—in defined-contribution retirement plans.

2026: Trump’s Labor Department proposes a regulatory framework providing additional protection for fiduciaries incorporating alternatives into participant-directed plans.

Meanwhile, Blackstone has moved from dreaming to building the infrastructure.

In October 2025, Blackstone created an entire Defined Contribution business unit specifically devoted to expanding private-market investments in retirement plans.

And in January 2026, Blackstone joined Empower’s private-markets retirement program, designed to put private equity, private credit, infrastructure and private real estate into defined-contribution plans through CIT structures.

This isn’t some theoretical policy debate anymore.

There is an enormous business being built around it.

Schwarzman and Trump

Schwarzman hasn’t merely been another Wall Street executive watching Trump from a distance.

After Trump’s 2016 election, Trump selected Schwarzman to chair his Strategic and Policy Forum, putting the Blackstone CEO at the center of a group of corporate advisers to the new administration.

The Washington Post subsequently described Schwarzman as one of Trump’s most generous donors and a key adviser with unusually regular access to the president.

Their social relationship went back even further.

Donald and Melania Trump attended Schwarzman’s infamous 60th birthday celebration in 2007.

Reported estimates put the cost at roughly $3 million to $5 million.

The Park Avenue Armory was transformed to resemble Schwarzman’s enormous apartment.

There were hundreds of guests.

Rod Stewart and Patti LaBelle performed.

If anyone ever needed a visual representation of how different the private-equity economy is from the world of the average 401(k) participant, this party might be difficult to beat.

Then There Was the Hitler Analogy

Schwarzman’s political rhetoric has occasionally been as extravagant as his parties.

When the Obama administration proposed changing the favorable tax treatment enjoyed by private-equity executives in 2010, Schwarzman compared the fight over taxes to war and invoked Hitler’s invasion of Poland in 1939.

He later apologized for the analogy.

But the episode illustrates something important about private equity’s relationship with Washington:

The industry takes government policies affecting its economics extremely seriously.

Carried interest matters.

Tax policy matters.

Regulation matters.

And gaining access to trillions of dollars sitting inside America’s defined-contribution retirement system matters enormously.

And Then There Is Mitch McConnell

This is where the Kentucky connection gets especially interesting.

Schwarzman became one of the biggest financiers of the Senate Leadership Fund, the powerful super PAC closely associated with Mitch McConnell’s Senate political operation.

In the 2018 election cycle, Schwarzman contributed $5 million to SLF.

His support subsequently became much larger.

By the 2020 election, Schwarzman’s contributions to the McConnell-aligned Senate Leadership Fund ultimately reached approximately:

$35 MILLION

That isn’t a typo.

Thirty-five million dollars.

Blackstone executives also showed up prominently among contributors to McConnell’s own campaign operation. The Louisville Courier Journal reported in 2019 that 29 Blackstone employees contributed $95,400 during a single fundraising quarter, one of the largest blocks of Wall Street money flowing into McConnell’s campaign.

Private equity wasn’t merely another industry contributing to Washington.

It had become a major source of political money.

Consider what has happened:

A private-equity billionaire publicly says accessing retirement assets is an industry “dream.”

He becomes a major Trump adviser and donor.

He pours tens of millions of dollars into the political operation associated with Mitch McConnell and the Republican Senate majority.

Trump subsequently directs his administration to open 401(k)s further to private equity.

Blackstone establishes a dedicated business unit to capitalize on the defined-contribution market.

And now Trump’s Labor Department is proposing rules designed to make it easier for fiduciaries to put alternatives into those plans.

Then, during the public-comment process, Bloomberg discovers thousands of suspiciously similar comments supporting the policy—including comments attributed to people who were already dead.

Stephen Schwarzman told us years ago what private equity wanted.

Your 401(k).

He called access to these retirement assets a “dream.”

Blackstone and the rest of the alternatives industry potentially stand to gain access to trillions of dollars of retirement savings—and the fees that come with managing them.

Schwarzman simultaneously became an extraordinarily important financial supporter of the political establishment capable of helping make that dream possible.

Now Washington is opening the door.

The relevant fiduciary question therefore isn’t:

Does Stephen Schwarzman’s dream benefit Blackstone?

That’s pretty easy.

The question is:

. The Washington Post documents Schwarzman’s access to Trump, Trump’s attendance at the lavish 2007 party, and Schwarzman’s $250,000 inaugural contribution.

For the McConnell money, FactCheck puts Schwarzman’s 2020 Senate Leadership Fund contributions at $35 million, while the Courier Journal reporting is independently quoted in a Kentucky pension-litigation filing identifying $95,400 from 29 Blackstone people to McConnell’s campaign in one 2019 quarter.

Blackstone’s Defined Contribution announcement · PBS/AP on Schwarzman’s 401(k) “dream” · Washington Post on Schwarzman and Trump · FactCheck on the McConnell-aligned Senate Leadership Fund

More Academics Oppose Private Equity in 401(k) – Clayton and de Fontenay  

ERISA plaintiff lawyers looking for the next generation of 401(k) and 403(b) cases may be looking in the wrong place.

The biggest opportunities may not be another mega-plan lawsuit over a few basis points of mutual-fund expenses or forfeitures.

They may be sitting quietly inside mid-sized retirement plans—especially hospitals and other plans dominated by insurance companies.

I recently discussed exactly this with Jeffrey Snyder on Broadcast Retirement Network’s “Retirement Risk Radar: Fresh ERISA Litigation Highlights.” The interview focuses on fixed annuities, hidden insurer spreads, private credit, target-date funds, CIT transparency and emerging ERISA litigation theories. BRN says its programming reaches an audience of more than 2.31 million and is syndicated through major websites and news outlets.

Watch the interview:
Retirement Risk Radar: Fresh ERISA Litigation Highlights — YouTube

The basic message to the plaintiff bar is simple:

There Are Potential Cases Everywhere

I have worked with ERISA plaintiff firms investigating and filing more than 40 fixed-annuity excessive-fee and prohibited-transaction cases.

I don’t think we’ve exhausted the market.

I think we’ve barely started.

I reviewed the Form 5500s for 9,404 ERISA defined-contribution plans with more than $100 million in assets. After screening out much of the lower-cost Vanguard/Fidelity/State Street/Schwab universe and concentrating on the insurance-heavy market, I reviewed roughly 4,000 plans.

I identified:

3,568 plans with more than $211 BILLION in fixed-annuity assets.

And that doesn’t include the enormous universe of plans below $100 million.

More Than 40 Fixed Annuity Cases Filed. Just Scratching the Surface

The Plaintiff May Not Even Know He Owns an Annuity

This is one reason these cases haven’t already flooded the courts.

Ask a participant whether his 401(k) owns an insurance-company general-account annuity and he will probably say no.

Ask whether he owns the:

Fixed Account.
Guaranteed Fund.
Stable Value Fund.
Capital Preservation Account.

Now you may have something.  The participant sees an account balance and an interest rate.

What he generally doesn’t see is the economics behind it.  If the insurer earns 5%, 6%, or more on the assets supporting the contract while crediting participants 2% or 3%, the participant doesn’t receive a mutual-fund-style expense ratio showing the insurer’s economic spread.

That difference can dwarf the investment-management fee disputes that have dominated 401(k) litigation.

A 200-basis-point differential on $50 million is $1 million a year or $6 million in damages over a 6 year class period

That is where plaintiff lawyers should be looking.

Hospitals May Be the Target-Rich Environment

Hospitals deserve special attention.

After years of mergers, acquisitions and recordkeeper changes, some hospital systems have accumulated what I call “Hospital Zombie Funds.”

One acquired hospital brings a VALIC contract.  Another brings Lincoln. Another has MetLife.

Twenty years later, the retirement program can resemble an archaeological dig of legacy insurance contracts, separate accounts and forgotten investment options. My review of dozens of hospital plans found examples of tiny legacy investments, sometimes with very few participants remaining.

Hospital Zombie Funds: The Hidden Retirement Plan Time Bomb No One Is Talking About

The litigation question practically writes itself:

Who is monitoring these investments?

ERISA’s continuing duty to monitor doesn’t disappear because an investment came into the plan through a merger.

And insurance contracts can create an especially interesting discovery trail because getting out may involve surrender charges, market-value adjustments, withdrawal restrictions or negotiated termination provisions.

That creates another question:

Did the fiduciaries retain the investment because it was prudent—or because terminating the contract would expose how expensive the original decision had become?

Then find a participant.

The participant often has no idea that the boring-looking “fixed” option inside the plan may be one of its most economically interesting investments.

:

Who got paid?

That can move the case beyond a conventional prudence claim and into potentially much more consequential conflict and prohibited-transaction issues. The precise claim, of course, depends on the particular contract, parties, transactions and facts.

Don’t Ignore the Target-Date Fund

The next frontier may be even larger.

As I discussed on Retirement Risk Radar, plaintiff lawyers should also start looking underneath target-date funds.

The familiar mutual-fund wrapper increasingly competes with collective investment trusts and other structures that can make it harder to see the underlying economics.

If a target-date vehicle begins holding:

private equity + private credit + annuities + affiliated products

the fiduciary investigation should not stop with the target-date fund’s headline fee.

The question becomes:

What contracts and compensation arrangements are hiding underneath it?

That’s where tomorrow’s cases may come from.

The Cases Are Out There. The Bottleneck Is Finding Plaintiffs.

That is the irony.   After more than 40 fixed-annuity cases, my biggest concern isn’t that we’re running out of defendants.   It’s the opposite.

My Form 5500 review identified 3,568 plans and $211 billion of fixed-annuity assets just among plans over $100 million.

The hard part is connecting potentially problematic plans with participants who have standing to challenge them.  So my message to ERISA plaintiff lawyers is straightforward:

Stop assuming the best cases are necessarily at the biggest companies.

Look at the $100 million-to-$1 billion plans.   Look at hospitals.

Look at insurance-heavy 401(k)s and 403(b)s.

Follow the contracts. Follow the money.

The plaintiff bar hasn’t exhausted the next generation of ERISA investment litigation.

It may not even have found 5% of it yet.

https://broadcastretirementnetwork.com/  Retirement Risk Radar Fresh ERISA Litigation Hihglights.

Hospital Zombie Funds: The Hidden Retirement Plan Time Bomb No One Is Talking About

More Than 40 Fixed Annuity Cases Filed. Just Scratching the Surface

STRS sends teachers’ pension money to private equity. Private equity makes money privatizing education. Ohio teachers get squeezed at both ends.

A new August 2026 report on Private Equity in Michigan Childcare and K-12 Education should be required reading for every Ohio teacher and every STRS trustee.

Its lesson is brutally simple:

Private equity doesn’t just invest teachers’ pension money. It increasingly makes money extracting dollars from the institutions that employ those teachers.

The Michigan report documents private-equity ownership of childcare companies and contractors providing teaching, special education, behavioral health, transportation and other school services. It argues that outsourcing can transfer money that once paid public employees into contracts carrying corporate overhead and investor returns.

Ohio teachers should recognize the business model.

STRS Helps Supply the Ammunition

STRS Ohio has poured billions into private equity, private credit and other alternatives.

At the same time, Ohio educators are watching the public-school ecosystem become increasingly privatized.

That creates one of the strangest circular money flows in American education:

Teacher contributions → STRS → private equity → education companies → contracts and public subsidies → private-equity profits.

Then teachers are told there isn’t enough money for salaries, benefits or reliable COLAs.

STRS isn’t merely an innocent investor standing outside this process. Its capital helps finance the industry doing the consolidating.

And the people administering this system can be paid extraordinary amounts.

According to STRS compensation data I previously analyzed, its investment staff averaged about $181,000, while its CIO received approximately $914,000—several times what Ohio pays its governor and far above the compensation of most Ohio educators.

Think about that incentive structure:

Teachers provide the capital.

Wall Street gets the fees.

STRS investment staff get Wall Street-style compensation.

Teachers get the pension risk.

And now teachers can also face the economic consequences of privatization in their workplaces.

Michigan Shows What the End Game Can Look Like

The Michigan report describes private-equity-backed contractors supplying critical K-12 positions including teachers, healthcare workers, transportation, food service and special-education personnel.

Detroit alone approved more than $22.5 million for four private-equity- or venture-backed special-education contractors for FY2026.

One company, Stepping Stones Group, grew through repeated acquisitions after its creation by Shore Capital and subsequent acquisition by Leonard Green & Partners. The Michigan report describes 20 additional acquisitions and a 2024 $4.25 million settlement of wage-and-hour claims, which the company denied.
This is important for Ohio because the same outsourcing model already operates here.

Soliant, for example, currently advertises contract special-education positions in the Cleveland and Mentor areas.

The economic question is obvious:

Why should a school district pay enough money to support a teacher plus a corporate staffing company plus private-equity investors when it may be able to employ the teacher directly?

The Michigan report cites previous PESP research estimating that one California district could have saved $6 million by bringing PE-backed special-education staffing positions back in-house.

Ohio should run the same calculation.

Ohio Has Another Privatization Accelerator: Vouchers

This is where the Michigan report becomes even more relevant.

Its final section argues that voucher-type programs can subsidize private providers and outsourced educational services, including transportation and before- and after-school programs.
Ohio is already far down this road.

Ohio spent approximately $1.09 billion on its five private-school voucher programs in FY2025.

The pro-school-choice organization EdChoice estimates Ohio private-school-choice spending at roughly $1.12 billion, or about 4.2% of combined choice-program and public K-12 current expenditures, ranking Ohio fifth nationally by that measure.

And there is another downstream expense rarely discussed.

As voucher enrollment expanded, Ohio public districts remained responsible for transporting many private-school students. AP reported in 2025 that the combination of driver shortages and expanded school choice left some districts struggling to provide transportation even to their own high-school students.

So public schools can lose students and funding while retaining infrastructure obligations.

That’s a remarkably attractive environment for outsourcing.

Enter Vivek Ramaswamy

Ramaswamy’s own gubernatorial platform says he wants to give parents more “meaningful choices over where and how their children learn.” It also says he wants Ohio to pay excellent teachers more.

Those goals aren’t inherently contradictory.

But there is a question his campaign should have to answer:

Where does the money come from?

If Ohio simultaneously expands school-choice subsidies, encourages privatization and outsourcing, and maintains enormous public-pension allocations to private equity, then “pay teachers more” runs into a financial system taking money out at several other points.

Ramaswamy is particularly relevant because his business career sits comfortably inside the broader private-capital ecosystem rather than outside it. As I have previously documented, his companies and investments intersect with private equity, data infrastructure and financial networks that depend heavily on institutional capital.

So don’t expect an Ohio governor from that ecosystem automatically to ask:

Why are Ohio teachers financing private equity in the first place?

The Epstein Issue Needs to Be Framed Correctly

Ramaswamy should not be accused of having a personal Jeffrey Epstein relationship without evidence. I have seen none.

That isn’t the argument.

The more defensible point is that Ramaswamy operates within the modern elite private-capital ecosystem in which many institutions and financiers overlap with firms touched by the Epstein scandal.

Apollo illustrates why this matters.

Ohio teacher retirement assets have been invested with Apollo-related strategies. Apollo co-founder Leon Black’s enormous payments to Epstein are documented, and the controversy has generated renewed scrutiny of Apollo governance.

That does not make every Apollo investor, executive, politician or business associate an Epstein associate.

It does create a legitimate fiduciary question:

At what point does a governance scandal become serious enough that a public pension reexamines the manager?

Ohio STRS appears much more comfortable asking teachers to bear private-market opacity than asking Wall Street managers uncomfortable questions.

The Great Ohio Irony

Ohio teachers are effectively participating in two different labor markets.

In one:

A teacher is a public employee whose compensation must be restrained because taxpayers supposedly can’t afford more.

In the other:

An STRS investment professional overseeing that teacher’s money can receive hundreds of thousands of dollars annually because STRS says it must compete with Wall Street for talent.

Meanwhile the actual Wall Street firms can take pension management fees and invest in companies positioned to take additional dollars out of education.

That isn’t capitalism versus socialism.

It is something much simpler:

The people closest to the financial plumbing get paid first.

Teachers Should Follow Their Own Money

The Michigan report gives Ohio teachers a roadmap.

STRS should publish a cross-reference showing:

Every STRS private-equity manager → every education, childcare, transportation, staffing, special-education and ed-tech company owned by that manager → every contract those companies have with Ohio public schools.

Then add:

STRS capital committed.

Fees paid to the private-equity manager.

Ohio school dollars paid to its portfolio companies.

Number of public positions outsourced.

Difference between contractor billing rates and employee compensation.

That would reveal something pension reports never show:

Teachers may be financing the companies replacing teachers.

And that is where pension policy becomes education policy.

The Bottom Line

The old argument about STRS private equity was:

Does private equity earn enough after fees to justify its risk and secrecy?

The Michigan study raises a bigger question for Ohio:

What if teachers’ retirement money is helping finance the privatization of the very public-school system that generates their salaries and pensions?

Ohio teachers could then lose three times:

Lower salaries and weaker public-school finances.

Hundreds of millions in opaque investment fees.

And retirement assets exposed to the same private-equity machine extracting money from education.

Meanwhile, some STRS investment employees make multiples of the governor’s compensation to keep that machine running.

That’s not diversification.

That’s teachers financing both sides of their own economic squeeze.

Table 1 — The clearest STRS → Private Equity → Ohio Education loop

STRS Ohio PE manager	Education portfolio company	What company sells to schools	Evidence of Ohio activity	Why it matters
Vistria Group	Soliant	Special-ed teachers, intervention specialists, school psychologists, SLPs and other outsourced personnel	Soliant is advertising 2026–27 contract intervention-specialist positions in Columbus and Cleveland	STRS teacher capital is invested with a PE manager whose portfolio company recruits licensed Ohio educators to work as contractors rather than district employees
Leonard Green & Partners	The Stepping Stones Group	Special-ed teachers, psychologists, therapists, nurses, behavioral specialists	Stepping Stones markets these contract services nationwide to school systems; Ohio district-by-district contract search should be next	Same basic model documented in Michigan: PE-owned middleman inserted between public schools and educators
Leonard Green & Partners	Invo Healthcare via Stepping Stones	Behavioral, autism and special-ed services	National school operations; Ohio contracts require district-record search	More consolidation under the same PE owner
EQT Partners	First Student	Outsourced school buses and special-needs transportation	Headquartered in Cincinnati; Ohio operating locations include the Germantown area	STRS invests with the owner of the largest outsourced school-transportation company in North America
Vistria Group	MGT	Outsourced technology, education and operational consulting	National school-market company; Ohio contracts need procurement search	Moves functions traditionally performed inside school systems to a PE-backed contractor
Vistria Group	ESS	Substitute teachers and school staffing	National K-12 staffing company; Ohio footprint needs contract-level verification	Another channel through which teacher shortages become a private-equity revenue opportunity

The ownership relationships are unusually easy to document. Vistria itself describes Soliant as a provider of outsourced workforce solutions to K-12 school districts, and its education portfolio also includes MGT, ESS and other education businesses. Leonard Green lists Stepping Stones as a current buyout investment providing therapy, autism and behavioral-health services for children. EQT identifies First Student as a current portfolio company headquartered in Cincinnati and focused on contracted school transportation.

Table 2 — Vistria may be the most important Ohio/STRS education cross-match

Vistria education investment	Business model	Potential Ohio public-school impact
Soliant	Outsourced teachers, intervention specialists, psychologists and healthcare professionals	Converts vacant district positions into contractor revenue
ESS	Substitute-teacher and school staffing	Takes a recurring function of school employment and monetizes staffing shortages
MGT Consulting	Technology, education and operational outsourcing	Turns school administrative/IT functions into outside contracts
Really Great Reading	Curriculum/literacy products	Public-school instructional spending becomes portfolio-company revenue
Edmentum	Digital curriculum and educational technology	District technology/curriculum appropriations become PE revenue
The Gardner School	Private early-childhood education	Competes in the broader publicly subsidized education/childcare market

This isn’t an inference about Vistria’s strategy. Vistria calls the area “Knowledge & Learning” and says one senior partner has directed about $4 billion across 14 investments in the sector, including Soliant, ESS, MGT and FullBloom.

And Soliant’s Ohio presence is concrete. It is currently advertising a 2026–27 full-time contract Intervention Specialist in Columbus and similar contract special-education positions in Cleveland.

That allows a very punchy formulation:

STRS gives Vistria teachers’ retirement capital. Vistria owns a company recruiting Ohio teachers out as contractors to schools.

We still need to determine whether any particular Ohio district paying Soliant is simultaneously contributing employer pension dollars to STRS for workers whose vacancies Soliant is filling. That requires district contract records before making the strongest version of that claim.

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Table 3 — Leonard Green and outsourced special education

Company	PE owner	Education service	Michigan study evidence	Ohio question
Stepping Stones Group	Leonard Green & Partners	Special-ed teachers, speech therapists, occupational therapists, psychologists, nurses and behavioral services	Detroit FY26: $8.71 million	Which Ohio districts pay Stepping Stones and how much?
Invo Healthcare	Leonard Green/Stepping Stones	Behavioral and special-ed staffing	Detroit FY26: $680,000	Identify Ohio contracts and staffing rates
Other acquired providers	Leonard Green/Stepping Stones	Related therapy and behavioral services	Michigan report says Stepping Stones completed numerous acquisitions	Determine acquired companies operating under different names in Ohio

The Michigan report says Stepping Stones was acquired by Leonard Green in 2021 and describes a rapid acquisition strategy; Detroit alone budgeted about $8.7 million for Stepping Stones and another $680,000 for Invo. It further reports that Stepping Stones agreed to a $4.25 million wage-and-hour settlement in 2024 while denying the allegations.

Stepping Stones’ own school-services page says it provides districts with special-ed teachers, school psychologists, therapists, nurses and other contracted personnel.

The Ohio audit question should therefore be: What is an Ohio district paying Stepping Stones per hour versus what the individual educator receives?

That is potentially a much more compelling number than the pension investment itself.

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Table 4 — EQT/First Student: probably the cleanest Ohio example

Item	Ohio connection
STRS investment manager	EQT Partners appears on STRS’s 2023 alternative-investment manager schedule
PE portfolio company	First Student
Headquarters	Cincinnati, Ohio
Business	Outsourced K-12 transportation
Scale	Approximately 1,000 school districts when EQT acquired it
PE acquisition	EQT announced a $4.6 billion acquisition of First Student and First Transit in 2021
Public subsidy angle	EQT says First Student’s fleet electrification has received roughly $400 million in EPA grants/rebates nationally
Ohio education connection	Ohio law expressly provides for both board-owned and contractor-owned and operated school buses
Pension loop	Ohio teacher pension capital → EQT → Ohio-based school contractor → public education spending

EQT explicitly says First Student benefits from increasing demand for outsourcing. Its 2021 acquisition announcement described First Student as serving roughly 1,000 districts and valued the combined acquisition of First Student and First Transit at $4.6 billion.

There is another Ohio twist. Ohio’s transportation rules explicitly recognize contractor-operated school buses as part of the state reimbursement structure.

Meanwhile, First Student is not some distant portfolio company. It is headquartered in Cincinnati. EQT also says its electrification program has attracted hundreds of millions of dollars of federal grants and rebates.

So this is a nearly perfect illustration of the circular capital flow:

Ohio teachers → STRS → EQT → First Student → Ohio school transportation spending + federal subsidies.

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Table 5 — Ohio childcare: PE penetration comparable to Michigan

The Michigan report found at least 160 PE-controlled childcare centers in Michigan and emphasized KinderCare, Learning Care Group, Goddard, The Learning Experience and Primrose.

Ohio clearly has substantial exposure to several of the same chains:

Childcare chain	PE owner/backer identified by CRS	Ohio footprint	STRS 2023 manager match presently verified?
KinderCare	Partners Group	Numerous Ohio centers including Akron, Cincinnati, Cleveland, Columbus, Dayton and others	Not yet established from STRS list
Learning Care Group	American Securities	Ohio operations need facility count	Not yet established
Goddard School	Sycamore Partners	Locations across 40+ Ohio communities/cities	Not yet established
Primrose Schools	Roark Capital	Ohio presence	Not yet established
Cadence Education	Apax Partners	Ohio presence needs count	Not yet established

The Congressional Research Service identified PE control of eight of the ten largest for-profit childcare organizations, including KinderCare, Learning Care Group, Primrose and Goddard.

KinderCare’s own locator shows a very large Ohio footprint stretching across the Cincinnati, Columbus, Cleveland, Akron, Canton and Dayton markets. Goddard lists Ohio schools in cities ranging from Akron and Cleveland to Cincinnati, Columbus, Dublin, Mason, Westerville and numerous suburbs.

Important distinction: I would not yet put those childcare companies in the direct STRS money-loop table because I have not verified their PE owners on the STRS manager schedule you supplied. They belong in a separate “PE in Ohio Education, but direct STRS LP connection not yet established” table.

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Table 6 — Michigan findings applied to Ohio

Michigan report finding	Ohio analogue	Evidence level
PE-owned companies replace/increasingly supply school employees	Soliant is recruiting Ohio intervention specialists and special-ed staff on contract	Verified
Teacher/therapy outsourcing generates PE revenue	Vistria owns Soliant; Leonard Green owns Stepping Stones	Verified
Pension systems can invest with firms that own education contractors	STRS lists Vistria, Leonard Green and EQT	Verified from STRS document
PE transportation company profits from public-school transportation	EQT owns Cincinnati-based First Student	Verified
Privatization can interact with vouchers and nonpublic-school expansion	Ohio districts face major transportation obligations for nonpublic/voucher students	Verified
Public districts can carry costs while education dollars migrate outside district payrolls	Dayton/Columbus transportation dispute demonstrates the structural issue	Verified, though causation needs careful wording
PE staffing can cost more than direct employment	Michigan report cites a California study estimating $6m savings from insourcing	Michigan evidence; Ohio calculation not yet done

The transportation angle deserves special attention. AP reported that Ohio’s expansion of private-school choice has added nearly 90,000 voucher students in four years, while public districts remain responsible for significant transportation obligations. Dayton reportedly operates more routes for nonpublic pupils than for its own students, while Columbus transports more than 3,000 nonpublic students.

That means the Ohio version can go beyond the Michigan report:

Voucher expansion creates transportation obligations → transportation shortages encourage outsourcing → EQT’s First Student sells outsourced transportation → STRS invests with EQT.

The last arrow is documented; what we still need is a district-by-district First Student contract list to quantify the dollars.

The table I would put at the center of your Commonsense article

Ohio teachers provide…	Money flows to…	Which owns…	Which earns money from…
STRS pension contributions	Vistria	Soliant	Contract teachers and special-ed staffing
STRS pension contributions	Leonard Green	Stepping Stones	Special-ed/therapy outsourcing
STRS pension contributions	EQT	First Student	Outsourced school transportation
STRS pension contributions	Vistria	MGT / ESS / Edmentum	Technology, substitute staffing and education services
Ohio tax dollars	School districts	PE-backed contractors	Staffing, transportation and services
Ohio tax dollars	Voucher/nonpublic education system	Private providers	Education and ancillary services

That’s the self-cannibalization story:

Ohio teachers’ retirement money is financing private-equity firms whose portfolio companies can make more money when school districts outsource work traditionally performed by public employees.

The evidence supports that formulation. I would avoid saying STRS investments caused layoffs or lower teacher salaries until we quantify individual Ohio district contracts and compare contractor rates with employee compensation.

The next level is worth doing: mine Columbus, Cleveland, Cincinnati, Dayton, Akron, Toledo and 20–30 other Ohio school districts’ board packets/check registers for Soliant, Stepping Stones/Invo and First Student, then add actual contract dollars and cross-match each payment back to STRS’s PE manager. That could produce a very damaging table with columns for District | PE contractor | STRS manager | Contract $ | Service | Estimated worker pay | PE/contractor spread.

Ohio STRS Investment Staff: Paid Excessively to Look the Other Way

Vivek Ramaswamy, Private Equity, and Ohio’s Public Pensions

EPSTEIN, APOLLO, AND OHIO TEACHERS’ BILLIONS

Ohio’s Epstein Blind Spot: While Wexner Dominates Headlines, Apollo’s Leon Black remains in Shadows

Columbus: The Highest Public Salaries in America — and Ohio Teachers are Paying for It

Ramaswamy, Crypto Money, Data Centers, Jeffrey Epstein, and Ohio Pensions

A new University of Kansas paper provides some of the strongest empirical evidence yet that affiliated financial advisers can hurt 401(k) participants by steering their money into proprietary products.

But Wall Street may already be moving the game to a much less transparent playing field.

William Bazley, Gjergji Cici and Junchao Liao studied thousands of 401(k) plans and found that when an adviser is affiliated with the plan’s recordkeeper, participant performance declines. The reason is particularly important: affiliated advisers steer participant money toward the recordkeeper’s proprietary funds. Unaffiliated advisers did not produce the same result.

The damage was concentrated in the proprietary investments. The researchers estimated roughly a 34-basis-point annual reduction in allocation alpha in proprietary funds, while finding no statistically significant comparable reduction in non-proprietary funds.

Even more damning, participants apparently weren’t getting much in return. The researchers found no meaningful improvement in participation, administrative fees or diversification.

University of Kansas 401(k) conflicts paper on SSRN

Wall Street’s Better Mousetrap

The Kansas researchers studied a relatively easy conflict to see:

Recordkeeper → affiliated adviser → proprietary mutual fund.

Mutual funds have tickers, SEC filings, published expense ratios and daily prices. Researchers can compare them.

The new 401(k) architecture can look more like this:

Recordkeeper → affiliated adviser → target-date CIT → affiliated stable-value/annuity product → lifetime-income guarantee → private equity/private credit.

Now try following the money.

Collective investment trusts don’t provide investors the same SEC-registered mutual-fund disclosure framework. Insurance-company general accounts add another layer. Private equity and private credit add valuation, liquidity and fee issues.

The conflict hasn’t disappeared.

It may simply have become harder to see.

Voya Shows Where This Could Be Going

Voya may be the clearest example.

Its MyCompass target-date products are three CIT series trusteed by Great Gray. Voya says those portfolios include either a guaranteed investment annuity contract or stable-value product issued by Voya itself.

So participant money can travel:

Voya retirement platform
→ MyCompass CIT
→ Great Gray trustee
→ Voya insurance product.

And Voya has separately partnered with Blue Owl to develop private-market investments for defined-contribution plans.

The old Kansas conflict involved a proprietary mutual fund.

The new version potentially involves recordkeeping + CIT + insurance + private markets.

That deserves considerably more scrutiny, not less.

AIG Corebridge/VALIC Doesn’t Even Make Us Draw the Corporate Chart

Corebridge essentially provides the chart itself.

Its disclosures say securities and investment advisory services are provided through VALIC Financial Advisors, while VALIC Retirement Services Company provides retirement-plan recordkeeping and acts as transfer agent for certain affiliated variable investment options.

And they’re all Corebridge subsidiaries.

That is:

Recordkeeper → affiliated adviser → affiliated investments → affiliated insurer.

The Kansas researchers found that affiliation matters.

Plan fiduciaries should probably start asking exactly how much money every entity in that chain makes.

John Hancock Calls It “Co-Manufacturing”

John Hancock has provided an unusually revealing description of where target-date funds may be headed.

It describes “co-manufactured” target-date CITs in which an asset manager’s conventional target-date strategy can be recreated as a CIT and some fixed-income exposure replaced by a recordkeeper’s proprietary stable-value product.

Think about what has changed.

Yesterday:

Participant chooses proprietary mutual fund.

Tomorrow:

Employer chooses target-date CIT as QDIA → participant is automatically enrolled → CIT buys proprietary product.

You don’t even need an adviser sitting across the table convincing the participant to buy something.

The default can do it automatically.

Then Come Private Equity and Private Credit

Private markets make the economics even more interesting.

Goldman Sachs developed a private-credit CIT for DC plans carrying roughly a 1% fee including expenses, and Great Gray target-date funds were among the first intended users. Those Great Gray funds also incorporate private investments managed by BlackRock.

Compare that with an institutional index fund costing a handful of basis points.

There is an enormous economic incentive to move retirement assets from cheap transparent public-market investments into products carrying insurance spreads, private-market management fees and other economics.

That doesn’t prove anyone is violating ERISA.

It does tell fiduciaries where they should look.

The Kansas researchers found a conflict when the money trail was relatively simple.

Now imagine repeating their study in 2026.

Instead of following:

401(k) → proprietary mutual fund

researchers may need to follow:

401(k) → recordkeeper → affiliated adviser → QDIA → CIT → trustee → investment manager → insurer → general account → private equity/private credit manager.

And at every step the fiduciary should ask:

Who gets paid?

How much?

Would this product have been selected if none of the parties selecting, recommending, administering or manufacturing it made money from it?

That may be the real sequel to the Kansas study.

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Appendix A — Tier Four Affiliation Matrix

● = documented/current; ◐ = partial, partnership, manufacturing or legacy relationship; — = not established in our initial review.

Company	RK	Affiliated Advice/Distribution	CIT/TDF	Affiliated Insurance/Stable Value	Lifetime Income	Private Markets DC	Conflict Priority
Principal	●	●	●	●	●	◐	Very High
Lincoln	◐	●	◐	●	●	—	High
John Hancock/Manulife	●	●	●	●	◐	◐	Very High
MassMutual	Legacy	◐	—	●	●	—	Medium/High
Prudential/PGIM	Legacy	◐	●	●	◐	◐	High
New York Life	Legacy	●	◐	●	●	—	Medium/High
Nationwide	●	●	●	●	●	—	Very High
Transamerica	●	●	●	●	●	—	Very High
Voya	●	●	●	●	●	●	EXTREME
AIG/VALIC	colspan	colspan	colspan	Now Corebridge — don’t double-count
MetLife	Legacy	◐	—	●	●	—	Medium
OneAmerica/AUL	●	●	◐	●	◐	—	High
Corebridge/VALIC	●	●	◐	●	●	—	EXTREME
Equitable	●/partner	●	●	●	●	—	EXTREME
Ameritas	●	●	●	◐	◐	—	High
Security Benefit	●	●	◐	●	●	—	High

Note: AIG/VALIC and Corebridge are now the same economic family and should not be treated as two independent companies.

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

Who Regulates Your 401(k) CIT? BlackRock, Goldman, Prudential and Lincoln Lead Back to Las Vegas

All of the 4^th tier have all these affiliated deals with lifetime income annuities other  CITS with Private Equity

The Four-Tier Structure of the U.S. 401(k) Marketplace