Trump Eyes 401(k) Expansion to Private Investments
Retirement Accounts Could Soon Include Private Equity, Real Estate
President Donald Trump is reportedly set to sign an executive order that would significantly broaden investment choices within 401(k) retirement plans. The proposed change aims to open the door to private-market investments, potentially allowing millions of Americans greater diversification opportunities for their nest eggs.
Access to Private Markets
The directive, as detailed by The Wall Street Journal, will task the Department of Labor and the Securities and Exchange Commission (SEC) with crafting new regulatory frameworks. These guidelines will enable employers and plan administrators to incorporate assets such as private equity, venture capital, real estate, and hedge funds into 401(k) offerings. Previously, these less liquid, often riskier investments were largely inaccessible to the average investor.
Industry Voices Support Diversification
Bryan Corbett, president and CEO of the Managed Funds Association (MFA), lauded the initiative, stating that expanded access to alternative investments in 401(k)s will empower Americans to build wealth more effectively for retirement.
“Expanding access to alternative investments in 401(k) retirement plans will provide more Americans with the diversification and investment options needed to build wealth and save for a successful retirement,”
—Bryan Corbett, President and CEO, Managed Funds Association
Private-market assets, unlike stocks and bonds traded on public exchanges, can offer potentially higher returns but also carry elevated risks and fees. This move could offer significant diversification benefits for those seeking to enhance portfolio performance. In 2023, U.S. private equity firms raised a record $1.5 trillion, indicating strong investor interest in these markets (Preqin).
Shifting Regulatory Landscape
This policy direction echoes moves made during Trump’s previous administration. In 2020, the Department of Labor indicated that some private assets could be suitable for retirement products. However, the Biden administration rescinded this guidance in 2021, citing concerns about risk and transparency for retirement savers.
Several financial firms are already preparing for such a shift. Institutions like Apollo Global Management and State Street have introduced target-date funds that include private-market components. Blue Owl Capital has also partnered with Voya to develop 401(k) products featuring these alternative investments.
