Okay For Sponsor to Invest Plan Assets in Fund it Manages?

[Guest YATPA]

We're setting up a new PSP for a company that manages an affiliated hedge fund. There will be 5 participants in plan - 4 HCEs and 1 NHCE. Is there a problem with plan assets being invested in the fund they manage? If not, are there limits on the percentage of total assets that can be invested? Does trustee direction of assets vs. participant direction make any difference? Thanks in advance for any input!

[Locust]

You definitely need expert legal help with this. You probably have a prohibited transaction unless a class exemption is available. Also prohibited transactions are possible within the hedge fund as the hedge fund assets may be considered plan assets. You need somebody who can look at the specifics of your transaction, determine if it would be prohibited, and if so, determine whether the transaction can be fit into a class exemption.