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A TIME OF UNCERTAINTY�“internalizing externalities”….

RULE OF MAN, NOT RULE OF LAW

‘DUAL STATE’

RADICAL REVENGE TARIFFS & TAX CUTS FOR 1%

INDIA 50%....BRAZIL 50%

ATTACK ON FED & ENTIRE FEDERAL GOVERNMENT

MARKET SWINGS DEPENDING ON LATE NIGHT TWEETS

ARTIFICIAL INTELLIGENCE

TULIP BULB CRAZE OR ELECTRICITY/AUTOMOBILE/TELEPHONE

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TRYING TO BE A FIDUCIARY

PROTECT “BENEFITS”

ACTIVE MANAGERS ALWAYS “REGRESS TO MEAN”
PASSIVE MANAGERS ALWAYS EQUAL OR BEAT ACTIVE MANAGERS

GROW “BENEFITS”

PRUDENT SEARCH FOR ASSETS WHICH PROVIDE FULL RANGE OF “BENEFITS” FOR PARTICIPANTS

(YES, CARE/SKILL/PRUDENCE/DILIGENCE….)

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TWO INTERTWINED TOPICS TO TOUCH

EXECUTIVE ORDER: TO ‘DEMOCRATIZE ACCESS TO ALTERNATIVE INVESTMENTS’

PROTECTING & GROWING “BENEFITS”

Care, skill, diligence & prudence

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CUNNINGHAM V CORNELL

HOW TO MISMANAGE MONEY

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CUNNINGHAM V. CORNELL �(& RETIREMENT OVERSIGHT COMMITTEE)

SCOTUS DECIDES, IN 2025, PROCEDURAL ISSUE

(COMPLAINT ALLEGATIONS VS. ANSWER AFFIRMATIVE DEFENSES)
REALLY …. PARTICIPANTS CAN GO FORWARD

ALL ABOUT FEES

ALL ABOUT KNOWING WHAT YOU PAY AND WHY YOU PAY

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SOME FACTS

BASIC DEFINED CONTRIBUTION PENSION PLAN

$1.9 BILLION ASSETS
18,470 PARTICIPANTS
“JUMBO PLAN”

TAX DEFERRED ANNUITY PLAN: ALSO DEFINED CONTRIBUTION

$1.2 BILLION ASSETS
10,982 PARTICIPANTS
“JUMBO PLAN”

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SOME MORE FACTS

TRUSTEES DETERMINE INVESTMENT OPTIONS AVAILABLE
PARTICIPANTS CAN CONTRIBUTE, EMPLOYER MATCHES SOME
PARTICIPANT PICKS WHICH OPTIONS TO ALLOCATE CONTRIBUTIONS TO
OPTIONS FROM TIAA-CREF AND FROM FIDELITY
299 OPTIONS (68 TIAA-CREF & 231 FIDELITY) IN RETIREMENT

RETAIL SHARES MUTUAL FUNDS, INSTITUTIONAL SHARES MUTUAL FUNDS, INSURANCE, VARIABLE ANNUITY OPTIONS, FIXED ANNUITY OPTION

301 OPTIONS (70 TIAA & 231 FIDELITY) IN DEFERRED ANNUITY

SAME VARIETY OF FUNDS

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DOWN INTO THE ”LAYERED” FEES

TIAA TRADITIONAL ANNUITY

IF WITHDRAW LUMP SUM W/I 120 DAYS OF TERMINATION, 2.5% ‘SURRENDER FEE
IF WITHDRAW OR CHANGE INVESTMENT, MUST DRAW DOWN OVER TEN YEAR PERIOD

CREF ANNUITY PLAN FEES

ADMIN FEE 24 BPS, DISTRIBUTION EXPENSE 9.5 BPS, EXPENSE RISK .5 BPS, INVESTMENT ADVICE 12.5 BPS = 47.5 BPS

TIAA INSURANCE PLAN

ADMIN 26.5 BPS, DISTRIBUTION EXPENSE 8 BPS, EXPENSE RISK .5 BPS, LIQUIDITY GUARANTEE 18 BPS, INVESTMENT MANAGER EXPENSE 36.5 BPS = 89.5 BPS

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RECORDKEEPER EXPENSES

RETIREMENT PLAN $1.9 B = TIAA $1.4B & FIDELITY $442 M
DEFERRED ANNUITY PLAN $1.2 B = TIAA $811 & FIDELITY $404M

COMPETITION FOR RECORDKEEPING IS FIERCE
PRICE IS USUALLY ‘FLAT RATE’ ‘FIXED DOLLAR’, NOT PERCENTAGE, SINCE WORK IS SAME FOR $7500 ACCOUNT AS FOR $750,000 ACCOUNT – SO FEE DOES NOT GO UP FOR SAME WORK AS PLAN GROWS
“JUMBO PLANS” OFFER OPPORTUNITY TO DROP FEES AS THEY GROW SINCE ECONOMIES OF SCALE EXIST – SO FEES SHOULD GO DOWN AS FUND GROWS, NOT UP AS W ‘PERCENTAGE’ BPS FEES

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“REVENUE SHARING” (KICKBACKS)� TO RECORDKEEPERS

PLANS ‘SHARE’ PORTION OF FEE COLLECTED FROM PARTICIPANT TO RECORDKEEPER, TO ‘REDUCE FEES CHARGED” TO FUND
IF RECORDKEEPER FEE IS PERCENTAGE (BPS) OF ASSETS, THEN ‘SHARE’ KEEPS GROWING FOR SAME WORK
EVEN IF RECORDKEEPER GETS FIXED FEE, STILL HAVE TO MONITOR CLOSELY THE REVENUE SHARED TO MAKE SURE RECORDKEEPER DOES NOT GET MORE THAN FIXED FEE

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ISSUE: USING TWO RECORDKEEPERS

STUDIES SHOW 90%+ OF D.C. FUNDS USE ONE RECORDKEEPER

STUDIES SHOW LOTS OF CHOICES & MULTIPLE RECORDKEEPERS COSTS MORE

1. TOO MANY CHOICES LEADS TO NO CHOICES
2. SPLITTING UP RECORDKEEPERS PREVENTS POOLING ASSETS FOR BETTER PRICING BASED ON AGGREGATE INVESTMENTS
3. MORE RECORDKEEPERS MAKES IT ALL THE MORE DIFFICULT TO MONITOR FEES AND EFFICIENCY AND COMPETENCE
4. PARTICIPANTS GET MORE CONSISTENT EDUCATION & INFORMATION FROM ONE RECORDKEEPER

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VIOLATIONS OF FIDUCIARY DUTY

NO COMPETITIVE BIDDING FOR RECORDKEEPING
PERCENTAGE OF ASSETS FEES, NOT FLAT DOLLAR FIXED FEES
UNMONITORED ‘REVENUE SHARING’ (KICKBACKS)
HUMONGOUS PLETHORA OF CHOICES
RETAIL SHARE MUTUAL FUNDS OFFERED AT HIGHER FEES THAN IDENTICAL INSTITUTIONAL MUTUAL FUNDS
RECORDKEEPERS INCREASED INCOME VIA FLOAT, INDIRECT COMPENSATION FROM TRADING, SPRED, REDEMPTION FEES, ETC…..NO MONITORING OF ALL THESE EXTRAS

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LOSSES DUE TO RECORDKEEPERS FEES

MARKET ANALYSIS SHOWED FEES FOR BOTH COMBINED SHOULD HAVE BEEN FOR BOTH FUNDS, ABOUT $1,050,000, OR $35/YEAR/PARTICIPANT
INSTEAD RETIREMENT PLAN PAID $2.9-$3.4 MILLION, OR $115 TO $183 / PARTICIPANT
INSTEAD DEFERRED ANNUITY PLAN PAID $1.8 - $2.2 MILLION, OR $145 TO $200 /PARTCIPANT
USDOL HAS NOTED THAT 1% HIGHER FEES OVER 35 YEARS MEANS 28% DIFFERENCE IN RETIREMENT ASSETS AT END OF CAREER

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INDEX FUNDS V ACTIVELY MANAGED FUNDS

“PROPERLY MEASURED, THE AVERAGE ACTIVELY MANAGED DOLLAR MUST UNDERPERFORM THE AVERAGE PASSIVELY MANAGED DOLLAR, NET OF COSTS.� NOBEL PRIZE ECONOMIST WILLIAM F SHARPE (1991)

“AFTER COSTS…IN TERMS OF NET RETURNS TO INVESTORS, ACTIVE INVESTMENT MUST BE A NEGATIVE SUM GAME.”

NOBEL PRIZE ECONOMIST EUGENE FAMA (2010)

ESSENTIAL POINT: ACTIVE MANAGER FEES ALWAYS EAT UP EXTRA RETURNS, IF ANY, OVER TIME, OR
“ALL REGRESS TO THE MEAN”

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DOES THIS SEEM EXTREME?

PLEASE READ THE 69 PAGES OF DETAILED PROOF IN THE COMPLAINT: CUNNINGHAM V CORNELL

EACH ALLEGATION BACKED BY COMPLETE ANALYSES & CHARTS OF PROOF

(IF YOU WENT TO CORNELL, READ IT AND WEEP….)

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EXECUTIVE ORDER

“DEMOCRATIZING ACCESS TO ALTERNATIVE ASSETS

FOR 401(K) INVESTORS”

AUGUST 7, 2025

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FIRST, WHAT IT IS AND WHAT IT IS NOT

SOLELY A DIRECTIVE TO USDOL TO REVIEW ALTERNATIVE INVESTMENTS FOR 401K’S
SOLELY A DIRECTIVE TO ISSUE PROPOSED REGULATIONS WITHIN 180 DAYS OF E.O. – BY FEBRUARY 3, 2026.
PROPOSED REGULATIONS POSTED THEN AND 30-60 DAYS FOR PUBLIC COMMENT
FINALIZED 30 DAYS THEREAFTER
EVEN IF FAST-TRACKED, NEW REGS IN EFFECT A BIT AFTER APRIL FOOL’S DAY

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Section 1. Purpose. Many wealthy Americans, and Government workers who participate in public pension plans, can invest in, or are the beneficiaries of investment in, a number of alternative assets. Yet, while more than 90 million Americans participate in employer-sponsored defined-contribution plans, the vast majority of these investors do not have the opportunity to participate, either directly or through their retirement plans, in the potential growth and diversification opportunities associated with alternative asset investments.

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Sec. 2. Policy. It is the policy of the United States that every American preparing for retirement should have access to funds that include investments in alternative assets when the relevant plan fiduciary determines that such access provides an appropriate opportunity for plan participants and beneficiaries to enhance the net risk-adjusted returns on their retirement assets.

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Sec. 3. Democratizing Access to Alternative Assets. (a) For purposes of this order, the term “alternative assets” means:

(i) private market investments, including direct and indirect interests in equity, debt, or other financial instruments that are not traded on public exchanges, including those where the managers of such investments, if applicable, seek to take an active role in the management of such companies;

(ii) direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate;

(iii) holdings in actively managed investment vehicles that are investing in digital assets;

(iv) direct and indirect investments in commodities;

(v) direct and indirect interests in projects financing infrastructure development; and

(vi) lifetime income investment strategies including longevity risk-sharing pools.

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FIDUCIARY DUTY TO PROVIDE “BENEFITS”

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ERISA

a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and—
(A)for the exclusive purpose of:
(i)providing benefits to participants and their beneficiaries; and
(ii)defraying reasonable expenses of administering the plan;

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CALIFORNIA CONSTITUTION

The assets of a public pension or retirement system are trust funds and shall be held for the exclusive purposes of providing benefits to participants in the pension or retirement system and their beneficiaries and defraying reasonable expenses of administering the system.

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COUNTY EMPLOYEES’ RETIREMENT ACT OF 1937 (CERL)

administer the pension system for the exclusive purpose of providing benefits to participants and beneficiaries, using the care, skill, and diligence of a prudent person acting in a similar capacity.

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RESTATEMENT (THIRD) OF TRUSTS�1992

SECTION 2. STANDARD OF CARE; PORTFOLIO STRATEGY; RISK AND RETURN OBJECTIVES.(a) A trustee shall invest and manage trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. In satisfying this standard, the trustee shall exercise reasonable care, skill, and caution (b) A trustee’s investment and management decisions respecting individual assets must be evaluated not in isolation but in the context of the trust portfolio as a whole and as a part of an overall investment strategy having risk and return objectives reasonably suited to the trust.(c) Among circumstances that a trustee shall consider in investing and managing trust assets are such of the following as are relevant to the trust or its beneficiaries:(1) general economic conditions; (2) the possible effect of inflation or deflation;(3) the expected tax consequences of investment decisions or strategies;(4) the role that each investment or course of action plays within the overall trust portfolio, which may include financial assets, interests in closely held enterprises, tangible and intangible personal property, and real property;(5) the expected total return from income and the appreciation of capital;(6) other resources of the beneficiaries;(7) needs for liquidity, regularity of income, and preservation or appreciation of capital; and(8) an asset’s special relationship or special value, if any, to the purposes of the trust or to one or more of the beneficiaries.(d) A trustee shall make a reasonable effort to verify facts relevant to the investment and management of trust assets.(e) A trustee may invest in any kind of property or type of investment consistent with the standards of this [Act].(f) A trustee who has special skills or expertise, or is named trustee in reliance upon the trustee’s representation that the trustee has special skills or expertise, has a duty to use those special skills or expertise.

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“BENEFITS”

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WHAT LAWS DO NOT SAY

DO NOT SAY ‘FOR CASH PAYMENTS”

DO NOT SAY ‘FOR MONEY BENEFITS ONLY’

DO NOT SAY ‘SOLELY FOR FINANCIAL INSTITUTIONS TO MANIPULATE PIECES OF PAPER & BITS OF INFORMATION SO THAT PARTICIPANTS GET SOLELY MORE FINANCIAL BITS AND PIECES OF PAPER TO MANIPULATE’

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TEXTUAL (!) ANALYSIS OF THE WORD “BENEFIT”

HISTORICAL DERIVATION:

LATIN BENE FACERE TO DO GOOD
LATIN BENEFACTUM GOOD DEED
FRENCH BIENFET DO GOOD
OLD ENGLISH BENEFIT KIND DEED

DICTIONARY DEFINITION

“BRING ADVANTAGE TO…”
‘RECEIVE AN ADVANTAGE….”

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SO…..

WHAT WOULD BRING ADVANTAGE TO PARTICPANTS
WHAT WOULD BE DOING GOOD FOR PARTICIPANTS

YES, MONTHLY CHECKS ARE A NECESSITY FOR RETIREMENT

BUT WHAT ABOUT INVESTMENTS THAT PRODUCE NOT ONLY SOLID MONETARY BENEFITS…BUT ALSO ADDITIONAL ADVANTAGES & GOOD THINGS?

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YES, ESG, BRIEFLY

ENVIRONMENTAL/SOCIAL/GOVERNANCE ISSUES ARE PART OF RISK ANALYSIS

YOU REFRAME THESE ISSUES – THEY ARE NOT ‘BENEFITS’ YOU ARE TRYING TO GAIN

THEY ARE SIMPLY FACTORS TO CONSIDER WHEN CONSIDERING RISK OF ANY GIVEN INVESTMENT

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BACK TO THOSE LOBSTERS:� REAL BENEFITS

REAL ESTATE

ASSUME ASSUMED RATE OF RETURN OF 4% TO 8 %
IF AFFORDABLE HOUSING FOR PARTICIPANTS CAN RETURN 8%

RENOVATING OLD HOUSING, BUILDING NEW HOUSING – FOR PARTICIPANTS

IF ASSISTED LIVING FACILITIES….

IF MEMORY CARE FACILITIES

IF ENTIRE RETIREMENT COMMUNITIES

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