The U.S. Department of Labor issued guidance on Wednesday that allows private equity investments to be offered to U.S. retirement plans as part of diversified investment funds, a move that the leveraged buyout industry has long called for.

Employee-sponsored defined benefit plans, such as the pension funds of public sector workers, have long been allowed to include buyout funds in their investment portfolios, turning private equity into a multi-trillion-dollar industry.

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But managers of defined contribution plans, including 401(k) plans, stayed cleared of private equity investments, uncertain whether federal rules allowed them to include them in their portfolios and fearful of the risk of litigation.

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The Department of Labor said on Wednesday that direct contribution plans are allowed to invest in private equity funds offered through professionally managed vehicles such as target-date, target-risk or balanced funds. The funds must include private equity only as one of component of their portfolio, the Department of Labor said.

The new guidance, issued in response to a request for clarification by investments firms Pantheon Ventures and Partners Group, is aimed at helping Americans saving for retirement gain access to alternative investments that often provide strong returns, Labor Secretary Eugene Scalia said in a statement.

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