What Is a Qualified Professional Asset Manager (QPAM)?
Let me explain what a qualified professional asset manager, or QPAM, really is. It's a registered investment adviser (RIA) that helps institutions handle their financial investments, with a strong focus on retirement accounts like pension plans. If you're managing a retirement plan through a QPAM, you can engage in transactions that would otherwise be off-limits under the Employee Retirement Income Security Act (ERISA).
Key Takeaways on QPAMs
As I see it, the essentials boil down to this: A QPAM is a registered investment adviser assisting institutions with investments, especially retirement accounts such as pension plans. When you employ a QPAM, your investment funds can operate in areas ERISA would normally prohibit. Also, banks and insurance companies can qualify as QPAMs if they're registered with the Securities and Exchange Commission (SEC).
QPAMs and ERISA
You need to understand how QPAMs tie into ERISA. The QPAM exemption is commonly used by those transacting with retirement plan funds. ERISA blocks certain deals when a plan interacts with entities that have conflicts of interest. But bring in a QPAM, and those restrictions lift for plan sponsors and fiduciaries. QPAMs represent pension plans in private placements, vetting them on behalf of the fund.
A QPAM must be a registered investment adviser with specific client assets under management (AUM) and shareholder's equity. For 2024, the U.S. Department of Labor has set these thresholds: For the fiscal year ending December 31, 2024, AUM is $101,956,000 and equity is $1,346,000; from January 1, 2025 to December 31, 2027, AUM rises to $118,912,000 and equity to $1,694,000; and from January 1, 2028 to December 31, 2030, AUM is $135,868,000 with equity at $2,040,000.
QPAM Qualifications
The rules for qualifying as a QPAM are laid out in Prohibited Transaction Class Exemption 84-14 from the Department of Labor. The QPAM has to be a bank or insurance company with certain equity capital or net worth, plus specified assets under management. They must acknowledge in writing to the client that they're acting as a fiduciary. The QPAM handles negotiating the transaction terms and decides for the plan whether to proceed. Importantly, the QPAM can't have convictions related to activities that undermine financial trust.
Fast Fact
Here's a quick note: The Investment Advisers Act of 1940 is the U.S. federal law that regulates investment advisors, defining their roles and responsibilities, including monitoring those advising pension funds, individuals, and institutions.
What Investments Can QPAMs Assist With Besides Retirement Plans?
Beyond retirement plans, QPAMs can help investment plans with real estate or other alternative investments.
What Is the Purpose of ERISA?
ERISA, the Employee Retirement Income Security Act, is a federal law designed to protect U.S. employees' retirement savings. It sets rules that qualified plans must follow to prevent fiduciaries from misusing plan assets.
Which Agency Monitors Registered QPAMs?
Starting in 2024, the U.S. Department of Labor intends to keep a list of QPAMs using the ERISA exemption on its website.
The Bottom Line
In summary, a QPAM is a registered investment adviser that aids institutions in managing retirement account investments, benefiting from ERISA exemptions. Banks and insurance companies can qualify if they're SEC-registered.
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