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In August, President Donald Trump unveiled an executive order ordering regulators to make it easier for private assets (including private equity, real estate, cryptocurrency and other alternatives) to be a part of retirement savers’ 401(k)s.
It was one of hundreds of executive orders the president has signed this year, and in the churn, some have found it hard to separate the wheat from the chaff. Did the order merely amount to a headline, or was it the starting gun for a permanent change to the retirement landscape?
To Cheryl Nash, the president of APL at InvestCloud, and many others in the industry, the “train has left the station,” and private markets will increasingly be a part of retirement plans in the years to come. Nash said she can’t leave a meeting these days without broaching the topic.
“I don’t think it’s a matter of if,” she said. “It’s a matter of when.”
Alternatives have long featured prominently in defined-benefit plan portfolios, such as pensions. While private asset allocations in defined contribution plans aren’t expressly outlawed, ERISA protections (and the accompanying litigation risks) and a limited product set make it difficult for plan sponsors to include them in 401(k)s. On the product side, however, private market asset managers are seeing a slowdown in institutional investors’ appetite for alternatives, and they’re anxious to develop vehicles to access the approximately $13 trillion held in Americans’ 401(k)s (in addition to the explosion of products aimed at the private wealth channel).
Trump first opened the door to increasing private assets in 401(k)s with an executive order during his first term, which the Biden administration subsequently rescinded. With Trump’s inauguration early this year, alts advocates were newly hopeful this time could be different.
Even before Trump’s August order, the Labor Department rescinded a Biden-era order discouraging the use of crypto in 401(k)s (one of the administration’s many crypto-friendly regulatory moves and coming amidst the Trump family’s increased presence in the crypto space).
Access ‘Within Reason’
After the order, SEC Chair Paul Atkins spoke about the need for retail alts access “within reason,” while SEC Commissioner Mark Uyeda urged litigation reform to protect plan sponsors and make it harder for investors (and their attorneys) to sue ERISA fiduciaries opting to offer alts in 401(k) plans.
This last point is top of mind for Rick Pederson, the vice chairman and chief strategy officer for Bow River Capital, a private alternatives investment manager. Pederson expected most of next year’s developments to be at the regulatory level, with the DOL potentially issuing further rulemaking or class exemptions, as well as additional guidance from both the DOL and SEC.
Pederson expected private assets to become mainstream in 401(k) plans by 2027 or 2028, because more legislation was needed from Congress to offset the litigation risks plan sponsors face if they add private asset sleeves before the laws are changed.
“I’m sure someone would argue that participants weren’t adequately informed of risks, etc.,” he said. “So, until we get legislative acknowledgement, I think we’re going to be living in this red zone of potential litigation, even with regulatory change.”
Pederson, Nash and Carlo di Florio, the president of the compliance consulting firm ACA Group, agreed that alts would first show up in retirement accounts via target-date funds or collective investment trusts (which, to some degree, is already happening).
For example, Apollo Global Management CEO Marc Rowan has talked about developing products for 401(k)s. In April, State Street Global Advisors, the asset management arm of State Street Corp., launched target-date funds with exposure to private markets. In May, Empower, the country’s second-largest provider of workplace retirement plans, announced a partnership with private investment fund managers and custodians to offer investments through collective investment trusts. Then in July, Goldman Sachs Asset Management launched the Goldman Sachs Collective Trust – Private Credit Fund. And in October, Blackstone Inc. created a new group focused on developing funds for retirement accounts.
Di Florio noted that such products already have protection through a public fund structure, which includes “enhanced board governance, enhanced transparency, enhanced allocation and conflict risk management policies.”
Preference for Private Equity
According to a recent report on retirement plan advisor trends from Escalent, one in four DC plan advisors said they are likely to recommend alternatives in their lineups, with another 10% stating they already are. Forty-four percent of national advisors and 35% with $50 million or more in managed assets reported that they’re already recommending alternatives or will do so in the future.
Advisors preferred private equity when it came to alts products, with 43% saying they’d recommended it or were likely to do so. PE was followed by private credit, private real estate and venture capital, at 41%, 39% and 32%, respectively.
Sonia Davis, a senior product director in Escalent’s Cogent Syndicated division and lead author of the study, said they expect DC advisors to seek out alternative options as clients increasingly inquire about them.
“The DOL’s decision marked a turning point for the use of alternatives in workplace plans, and the market is still adjusting,” Davis said. “What stands out in our research is how closely advisor interest tracks with the growing curiosity we are seeing among plan participants.”
However, there’s concern that the deregulatory atmosphere is setting up a domino effect that, if it falls, could threaten the stability of American workers’ retirement savings.
‘Risky’ Exposure
In the New York Times Magazine in October, Andrew Ross Sorkin wrote that expanding alts to 401(k)s would be “a live and extremely high-stakes test of whether the most complex corners of finance can be safely opened to millions of ordinary savers.”
And it’s not just pundits; outgoing SEC Commissioner Caroline Crenshaw has harshly criticized the agency’s deregulatory approach under the Trump administration.
In a recent speech at the Brookings Institution in Washington, D.C., Crenshaw stated that opening private markets to retirement assets was “a harmful policy choice,” exposing retail investors to “risky” investments designed explicitly for non-retail players.
“To justify this irresponsible departure from foundational pillars of the securities laws, my colleagues use lots of buzzwords—freedom, diversification, democratization,” she said. “Call it what you will, at bottom, it’s risky, and it’s reckless.”
Di Florio expected regulators to try threading the needle by requiring more disclosure for investors about private assets (even though avoiding the mandates of quarterly earnings and more disclosures can often keep companies private in the first place).
He also expected private market players to opt for compliance with the “rules of the road,” as the 401(k) market would prove too enticing. However, he noted that some private market players were concerned by the encroachment into the retail space.
“They’re concerned that they’ve got this good business, very innovative and entrepreneurial, that’s growing really fast and works well with institutional investors. If some product gets created for retail, and it ends up hiring retail investors and blowing up somehow, they’re going to get all painted with a broad brush, like ‘this industry is awful, and it hurts people,’” he said. “And suddenly the whole industry’s getting regulated.”
In a speech to the American Bar Association earlier this month, Brian Daly, the SEC’s Director of the Division of Investment Management, said that “democratization” for retail investors into alts won’t mean a “big bang” rule transforming “everything about how private funds are structured, moderated and operated,” but would instead move incrementally.
Nash agreed that a single, table-turning rule was unlikely to come from the commission, and she was preparing for piecemeal steps forward while platforms prepare for the operational load that private assets in the retail retirement space would entail.
“I think this year, 2025, set the foundation and the groundwork. In 2026, we’re going to start seeing more of this come into play, more than just the interval funds,” Nash said. “And towards the end of the year in 2026 and early 2027, I think we’ll really see this take hold.”
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