A Qualified Professional Asset Manager (QPAM) is a licensed investment advisor that specializes in making financial investments for various institutions, with a strong emphasis on retirement accounts such as pension plans.
Key Benefits and Features
- Expert Guidance: QPAMs offer expert financial guidance, particularly focusing on retirement accounts like pension plans.
- Legal Advantage: Utilizing a QPAM allows investment funds to engage in transactions otherwise restricted by the Employee Retirement Income Security Act (ERISA), leveraging what’s known as the QPAM exemption.
- Trustworthy Institutions: Registered banks and insurance companies can qualify as a QPAM if they meet specific requirements such as being registered investment advisers with the SEC.
- Financial Muscles: A QPAM is identified by managing assets worth at least $85 million and having shareholder’s equity of $1 million or more.
Deepening Your Understanding of QPAM
The Employee Retirement Income Security Act (ERISA) sets forth the criteria for what entities can qualify as a QPAM. Institutions such as banks and insurance firms are typical examples, but recent amendments also allow RIAs (Registered Investment Advisers) to qualify, given they oversee at least $85 million in assets and possess shareholder’s equity exceeding $1 million.
The primary advantage that investment funds gain from employing a QPAM is regulatory relief, known broadly as the QPAM exemption. This facilitates transactions otherwise prohibited under ERISA regulations, allowing them to execute vital financial activities.
How Does the QPAM Exemption Work?
ERISA limitations often prohibit plans or funds governed by it from specific transactions with potentially conflicted entities. However, having a QPAM involves lifting such restrictions, enabling transactions with various parties involved in plan fiduciaries and plan sponsors, provided the QPAM is not subjected to self-dealing or influenced by the transaction arrangements.
QPAMs play a crucial role in engaging pension plans in private placements. Their responsibility involves thoroughly vetting these placements catering to pension fund investments. They also provide assistance in real estate investments or leveraging other alternative financial avenues, paving a secure path for enhanced returns.
Prohibited Transactions and QPAM
QPAMs can legally execute transactions usually barred under ERISA section 406(a). These transactions may encompass sales, exchanges, leases, and extending credits between a pension plan and a party of interest. Utilizing QPAMs can reduce the risk of trustees being held personally liable, provided that QPAM services are diligently employed. However, hiring a QPAM doesn’t excuse any fiduciary negligence.
Qualifications for QPAM
The Department of Labor delineates the prerequisites for being recognized as a QPAM through the PTCE 84-14, which include:
- Institutional Criteria: The QPAM must be a bank, a savings and loan association, or an insurance company meeting prescribed financial equity and net-worth parameters or an RIA managing substantial assets and equity.
- Unrelated Entity Requirements: For eligibility, the involved counterparty cannot be the QPAM or related entities with defined ownership interests.
- Client Representation: The asset manager must clearly represent in writing its fiduciary capacity to the client.
- Decision-Making Vigilance: QPAMs should negotiate terms and decisively engage in transactions exclusively for client benefits.
- Integrity Clause: QPAMs must have a clean legal record regarding activities that may impact financial trust and reliability.
Experience the seamless financial expertise of QPAMs to reinforce your investment strategies and ensure optimal retirement fund performance. Leverage their robust management and strategic oversight for a more secure financial future.
Related Terms: RIA, AUM, fiduciary, plan sponsor, private placements, real estate investments, Department of Labor.
References
- Bloomberg Law. “The Price of Holding Retirement Assets: QPAMs Explained”.
- Federal Register. “Amendment to Prohibited Transaction Exemption (PTE) 84-14 for Plan Asset Transactions Determined by Independent Qualified Professional Asset Managers”.
- U.S. Dept. of Labor. “29 CFR 2570 Prohibited Transaction Exemption Procedures Employee Benefit Plans”.
