Of course, the early chatter about the Department of Labor’s new proposed retirement plan investment selection rules has focused on alternative assets.

The regulations were created, after all, in response to President Donald Trump’s Executive Order 14330, titled “Democratizing Access to Alternative Assets for 401(k) Investors.” Issued in August, the order called on DOL to facilitate the inclusion of alternatives like private equity, real estate and digital assets in 401(k) plans. Fast forward to April 2026, and it turns out, the regulations actually go a lot further than that: They also provide broad legal protections for the selection of any investment option within tax-qualified retirement plans, so long as the plan’s fiduciaries follow a prudent and well-documented process detailed in the proposal.

That’s a great thing, several industry experts told Retirement Upside, especially in a context where well-meaning retirement plan sponsors have faced more than a decade of heightened litigation under the Employee Retirement Income Security Act. Some suits have had merit, to be sure, but many have used what independent legal experts see as apples-to-oranges comparisons of the fees and performance of vastly different investment options to allege wrongdoing by plan fiduciaries in an attempt to drive settlements (and big payouts for plaintiffs’ attorneys).

“The proposed investment selection framework is a really positive development,” said Peter Ruffel, senior manager of defined contribution business at Captrust. “Innovation by advisors, asset managers and plan fiduciaries has been very much stymied by the threat of cookie-cutter lawsuits.”

What’s in the Proposal

If finalized as proposed, the framework should give clients real peace of mind and clarify their responsibilities as they build investment menus, Ruffel added. Interested parties have 60 days to submit comments on the DOL rule, which introduces what agency officials called an objective approach that plan fiduciaries can use to gain what is known in ERISA law as a “presumption of prudence” when selecting plan investments. Specifically, it requires plan fiduciaries to carefully consider the following six features of any potential investment:

• Performance
• Fees
• Liquidity
• Valuation
• Benchmarking
• Complexity

If they go through these points and find that an investment can deliver value to participants, they generally can’t be sued simply for making the selection.

“I’m a fan of this approach,” said Joel Shapiro, head of Wealthspire Retirement Advisory. “It clarifies that ERISA gives fiduciaries meaningful discretion and flexibility to select investments, including but not limited to alternative assets. It’s especially important that it speaks about assessing investments according to their risk-adjusted returns net of fees. It’s not focused on fees or performance in a vacuum, as many of these lawsuits do.”

What’s Not in the Proposal. As both Shapiro and Ruffel emphasized, the proposed regs apply only to the initial investment selection. They do not speak to a plan fiduciary’s equally important responsibility of monitoring investment fees and performance over time. “Based on language in the rule and its preamble, we’re expecting supplemental guidance on that topic sometime in the future,” Ruffel said.

Sustainable strategies don’t guarantee sustainable flows.

Investors pulled $21 billion last year from US mutual funds and ETFs with sustainable investment strategies, a record pace that just surpassed the previous high of $20 billion in 2024, according to a recent Morningstar report. By comparison, the broader world of US mutual funds and ETFs brought in $760 billion in 2025. The slow drain from sustainable funds follows a widespread pullback from the category that started several years ago, marked by strong fossil fuel market performance at the beginning of Russia’s invasion of Ukraine and a long-running campaign by the political right against environmental, social and governance criteria.

“While there are non-financial considerations that folks have on all sides about sustainable funds, generally investors position their portfolios based on what they expect from the market,” said Morningstar Associate Director Alyssa Stankiewicz, an author of the paper.

Energy Drain

As demand for sustainable funds has waned, asset managers have pulled backfrom them. In some cases, that has meant changing product names and/or removing sustainable investing considerations. In others, it has meant closing and liquidating funds or merging them with products that don’t have sustainable mandates. One of the most recent examples is Franklin Templeton’s Putnam funds shedding seven sustainable or ESG ETFs:

• The Putnam ESG Core Bond, High Yield and Ultra Short ETFs are closing and liquidating, per a filing Monday with the Securities and Exchange Commission.
• The Putnam PanAgora ESG International Equity and ESG Emerging Markets Equity ETFs will have the same fate.
• The company is also nixing its Putnam Sustainable Future and Sustainable Leaders ETFs.

Sustain a Bull Market? It’s not all bad news for sustainable investing advocates (this is The Daily Upside, remember?). Despite three years in a row of net outflows for US sustainable funds as a whole, some products, particularly passively managed ones, have attracted assets recently. For example, the First Trust Nasdaq Clean Edge Smart Grid Infrastructure Index Fund (GRID), raked in $2.5 billion last year, with its assets doubling to $5 billion, per the report. That fund has returned 44% over a year and over 4% so far this year. And more demand for power, including for AI and associated data centers, may bode well for clean-energy investments.
Further, climate-related risks have become central to asset management, and sustainability considerations, by any name, are probably present in a wider range of funds than is apparent at first glance. “The use of ESG factors has become commonplace within conventional investing,” Morningstar’s editorial director of sustainability, Leslie Norton, recently wrote. “A focus on financial relevance is strengthening funds that are explicitly sustainable, and trillions of dollars of assets remain sustainably invested.”

Thursday delivered a “Troubled Trifecta” of high oil, falling stocks and a gated exit.

Alternative asset manager Blue Owl said two of its private credit funds had been slammed with elevated redemption requests totaling $5.4 billion, forcing it to cap withdrawals. The blame, the firm said, rests with a wave of misplaced investor anxiety.

Who Gives a Hoot (Jittery Investors Do)

The $1.8 trillion private credit industry has been under intense scrutiny amid a string of failures by companies that secured loans on the less-regulated market. Last year, there were subprime auto lender Tricolor and auto parts company First Brands, and in February, there was mortgage lender Market Financial Solutions. Some have argued these are isolated cases that don’t reflect the broader sector, but a parade of prominent Wall Street voices, led by JPMorgan’s Jamie Dimon, have warned that more “cockroaches” are out there.

Adding to the pressure are fears that private credit has too much exposure to the software industry, where firms are getting squeezed by doomsday hypotheses of AI rendering their services as passé as a Blackberry keyboard. According to an iCapital analysis of SEC filings, the average software exposure of business development companies, widely considered a publicly traded proxy for the private credit market, is 15% to 20%. As a result, jittery investors have begun yanking their cash at levels that have overwhelmed fund managers. This has compelled firms including Apollo, Ares, BlackRock and KKR to limit redemptions in recent weeks. On Thursday, Blue Owl revealed in an SEC disclosure that two of its key funds were the latest to cap investor payouts:

• Investors asked to yank 21.9% from Blue Owl’s $36 billion Credit Income Corp. fund between January and March and a gargantuan 40.7% from its $6.2 billion tech-focused Blue Owl Technology Income Corp fund. Insisting there’s a “meaningful disconnect” between market sentiment and the funds’ performance, the firm said it would fulfill only 5% of the requests.
• Blue Owl suggested the redemption caps disclosed by its peers in recent weeks have intensified the anxiety over private credit, creating a “heightened negative sentiment toward the asset class.” Furthermore, the firm justified the redemption cap by insisting investor fears are misplaced because the “underlying credit fundamentals across our portfolio have remained resilient.”

More Than This: It’s not just massive redemption requests that are weighing on private credit. Using regulatory filings, Bloomberg calculated last week that Blue Owl’s Credit Income Corp. fund fell 0.86% in February, while noting that BlackRock’s HPS Investment Partners reported its HPS Corporate Lending Fund fell 0.3%. That proved the worst performance for both since 2022.