Private equity investments may be coming to your 401(k)


High the Dow down nearly seven percent today Jamie Meredith from half until it's in our guest here on the KDKA radio evening magazine Jamie let me pivot here I was reading an article about the the potential of private equity being available or in it for a one case a lot of folks are running the other way they they say that that would be terrible can you maybe fill folks in on what is actually being floated out there I is it pertains to potential investment options for four oh one K.'s in the future yeah absolutely so private equity is a way to invest in companies that really buy passes the stock market so a company would issue stock and sell it directly to investors but typically you have to be what's called a qualified institutional buyer to to participate in in private equity that means you have to either have a significant amount of money or a great deal of of investment experience so a lot of those opportunities are shut off to your typical fire so there have been folks clamoring to add private equity to four oh one K. programs because for most of us your four one K. is your largest investment balance in relatively speaking private equity has done fairly well relative to your average stock in the market now I'm not sure I'm a huge fan of that because private equity comes with its own risks number one there's no liquid market so you really can't sell it and if the company starts to go down the wrong path and is it you the it's it's doing poorly you may not be able to sell those shares because there's no market the seller to so could be a great deal of risk one of the benefits of the market is you look at a company like coca Cola trades a hundred million times a day literally a hundred billion times a day you don't have that with private equity so you really don't know what the value is typically there's a room of CPA's that go in and study the books and come up with an estimated value but you don't really know what the value is now the proposal that was floated earlier in the week was to not include private equity as necessarily a line item so you wouldn't see that on your menu where you would be able to participate in something called a fund of funds most people know it as a target date fund so that would allow some of these kind of it's a pre managed funds to include private equity as part of their underlying investment profile that's probably a good way to Wade into the shallow end you have to have some professional managers on there making decisions but I think private equity may be a little risky for four oh one

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