U.S. President Donald Trump will sign an executive order this morning at noon. This proposed order seeks to broaden the avenues available for new investments in retirement savings. The order calls for the U.S. Secretary of Labor to reconsider fiduciary guidance. One area this review will discuss is the private market investments available in 401(k) plans and other defined-contribution plans. Previously, private market assets had long been prohibited from entering these retirement accounts, but this new guidance seeks to change that narrative.
The executive order is a response to increasing attention on these new alternative assets, including cryptocurrencies and private equity. Though these investments do typically have higher fees, lower transparency and longer lockup periods, they can offer substantial diversification opportunities. In 2020, in an uncommon move, the Trump administration’s Department of Labor issued an information letter. It suggested that private market exposure would be permissible for defined contribution plans provided that certain requirements are satisfied.
This ambitious initiative has certainly unlocked the great creative potential of all asset owners and asset managers. They’re now on the leading edge of developing new products that allow private investments through 401(k) vehicles. Americans now have about $8.7 trillion in assets in these plans, meaning the potential impact of this order could be wide-reaching. BlackRock, the world’s largest asset manager, has some pretty alarming surprises up their sleeves. They are going to open up a 401(k) target date fund in the first half of 2026. This fund is only required to invest 5% – 20% in private investments.
We are proud to note that Empower is the nation’s second-largest retirement plan provider. In response, it will partner with the asset managers such as Apollo to bring more private market assets to retail investors. The federal agency overseen by President Biden has recently reiterated this guidance allowing for such investments. This decision is a bipartisan recognition of their growing role in retirement planning.
The shift in price was no doubt a reaction to major anticipated changes in private market capital infusions. This increase is indicative of the market’s optimism regarding the potential for more widespread adoption of alternative assets into retirement accounts. Indeed, Bloomberg News broke the story on this hugely significant development. So stay tuned for it to come to life later this year.
As the executive order signing date looms, President Trump is preparing to go all in. His move is intended to fundamentally change the retirement investment landscape. The Investment Company Institute plans to release more recent data on 401(k)s at the end of the first quarter of 2025. A lot of stakeholders have their eyes on these future moves.