President Donald Trump is set to sign an executive order aimed at simplifying the process for everyday savers to allocate their retirement funds into alternative assets. This move will potentially open the door for investments in private equity, real estate, and cryptocurrencies, as confirmed by two White House officials. The executive order will instruct the Labor Department to collaborate with the Treasury Department and the Securities and Exchange Commission to assess necessary regulatory changes for alternative-asset managers to access employer-sponsored retirement plans.
With over $12 trillion held in retirement plans, including approximately $9 trillion in 401(k)s, these funds represent significant opportunities for alternative asset managers, who view this capital market as largely untapped. Notable firms are already paving the way. For example, Apollo Global Management has teamed up with Empower, the second largest retirement plan provider in the U.S., to facilitate private-asset investment access, while BlackRock has forged a similar partnership with Great Gray Trust.
The executive order aims to resolve longstanding legal barriers that have historically prevented alternative-asset managers from participating in defined-contribution plans, which have predominantly offered public investments in stock and bond markets.
Despite the promising outlook, the private market has faced challenges. According to a recent report by PitchBook, capital flow into private-market investments decreased nearly 30% between 2021 and 2024, affecting all areas of the industry from venture capital to real estate. Concerns exist regarding the liquidity of these assets, as they require long-term commitments and are generally harder to cash out in times of emergency. Duke University finance professor David Robinson emphasizes that while mutual fund investors can easily liquidate their shares, private market investors lack the same flexibility.
Additionally, a 1974 federal law, the Employee Retirement Income Security Act, mandates that employer-sponsored retirement plans act in the best interest of workers and prioritize diversified investments. This legislation has made it challenging for everyday Americans to invest in higher-risk private-market assets and cryptocurrencies due to associated higher fees and reduced transparency.
While this executive order may pave the way for new investment opportunities, it also raises questions about the risks that typical savers may face in the new marketplace. As alternative investments grow in popularity, it becomes vital for investors to remain informed about the nature of these assets and the potential implications on their long-term financial health.
This shift towards allowing wider access to alternative investments reflects a changing landscape in the investment world, encouraging more diverse portfolio options for savers and possibly leading to a more resilient and varied retirement strategy.