President Donald Trump has signed an executive order that brings in new investment options for 401(k) retirement plans. This executive order allows alternative assets like private equity, cryptocurrencies and real estate into workplace retirement plans, and seeks to “relieve the regulatory burdens and litigation risk” to allow employers that sponsor retirement plans to “apply their best judgment in offering investment opportunities to relevant plan participants.” Previous reports had already noted that Trump was planning to introduce cryptocurrency among other assets to retirement plans.
The executive order calls for the Labor Department to “reexamine” its “past and present guidance regarding a fiduciary’s duties under the Employee Retirement Income Security Act of 1974.” The DOL must “clarify” its position on alternative assets – which also include real estate, commodities and digital assets – and “identify the criteria that fiduciaries should use to prudently balance potentially higher expenses against the objectives of seeking greater long-term net returns and broader diversification of investments.” The order also tells the Securities and Exchange Commission (SEC) to make it easier for participants in workplace plans to gain access to alternative assets.
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Jaret Seiberg, a financial services policy analyst at TD Cowen Washington Research Group stated that this executive order wouldn’t change policy, but it will clarify Trump’s position to the rest of the government. “It will still require the agencies to craft new rules. That could take into 2026,” he said.
The introduction of private equity investments into workplace retirement plans has been seen as a big win by money managers. Blackrock CEO Larry Fink, who is a big advocate of the inclusion of private equity, had argued in his most recent annual shareholder letter that “democratizing” private markets could provide market-beating long-term returns for American workers.
However, some investor advocates have argued that there are major risks associated with these new investment avenues. “The objective for the average person is to have a safe, secure retirement plan,” says Jerry Schlichter, founding partner of Schlichter Bogard, a firm known for lawsuits on behalf of employees over excessive fees in 401(k) plans. “When you talk about new areas like cryptocurrency or private equity, these are fraught with danger for investors for a variety of reasons.”
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While Schlichter and others agree that these assets have the potential to make money for investors, they believe they may not be appropriate for everyday investors’ retirement accounts. Sen. Elizabeth Warrens, the top-ranking Democrat on the Senate Banking Committee has also expressed skepticism and concern. She is reportedly concerned about the systemic risk the private credit market may pose to the U.S. financial system and the U.S. economy, and is seeking more information from Empower, one of the largest recordkeepers that plans to offer its 401(k) clients a private equity option as early as next quarter.
With the due diligence fiduciaries will have to do, most workplace plan retirement savers aren’t likely to be given the option to invest in a private market option soon. “The executive order may remove some of the objections employers have had around incorporating private assets into 401(k) options, particularly concerns around litigation; however, it may not be enough to overcome cost concerns of employer 401(k) committees or resources to evaluate investments,” analysts at Pitchbook, a private market data and financial research platform, wrote in a research note.