Trump endorses measure expanding investment options in 401(k) plans for alternative assets
The executive order signed by President Donald Trump on August 7, 2025, titled "Democratizing Access for 401(k) Investors," aims to open the $12-trillion market for defined-contribution plans, of which 401(k)s are the most popular, to investments by big alternative asset managers [1][2][3][5].
This order directs federal regulators—the Department of Labor (DOL), Securities and Exchange Commission (SEC), and Treasury—to facilitate greater access to alternative assets such as private equity, real estate, cryptocurrency, and private credit in 401(k) and other defined contribution (DC) plans. The move could modernize retirement portfolios beyond traditional stocks and bonds [1][3][5].
The DOL is instructed to reexamine fiduciary rules and consider issuing "safe harbor" protections for fiduciaries who include alternative assets, and the SEC is tasked with modifying regulations to ease participant access to such investments [1][3]. This order does not change ERISA itself but aims to reduce regulatory burdens and the risk of fiduciary litigation, which have historically limited plan sponsors from offering these alternative investment options [2][4].
The implementation of the order is unlikely to happen immediately, according to private equity executives. CFO Martin Small suggested that the industry may seek litigation reform before expanding into the market [4].
BlackRock plans to launch its own retirement fund that includes private equity and private credit assets next year [2]. Asset managers, such as BlackRock and Blackstone, have welcomed the news, seeing it as a step towards modernizing retirement savings [5]. Many private equity firms are eager for the potential influx of cash from retail investors.
However, critics warn that the investments are inherently riskier, lack the same disclosures, and carry higher fees than traditional retirement investments [4]. Democratic Senator Elizabeth Warren expressed concerns about the safeguarding of retirement savings placed in private investments, citing weak investor protections, lack of transparency, high management fees, and unsubstantiated claims of high returns [4].
Proponents argue that younger savers can benefit from potentially higher returns on riskier investments in funds that get more conservative as they approach retirement [3]. For investors, expanded investment choices may offer enhanced diversification, potential for higher net risk-adjusted returns, and a broader mix of asset classes, previously accessible mostly to wealthy or institutional investors [1][3][5].
The executive order does not expressly ask the agencies to add more legal protections for investments, but directs them to clarify or potentially revise rules that could help shield the industry from litigation risk [4]. Plaintiffs' lawyers are preparing for potential lawsuits from investors who may not understand the complexity of the new investments [4].
Easing access to cryptocurrencies in 401(k)s could be Trump's latest embrace of digital assets, potentially benefiting sectors including asset managers that operate crypto exchange-traded funds. Gerry O'Shea, head of global market insights at Hashdex Asset Management, believes the executive order will help accelerate the trend of Bitcoin being included in long-term investment strategies [5].
In defined contribution plans, employees make contributions to their own retirement account, and the invested funds belong to the employee, but there is no guaranteed regular payout upon retirement. The Department of Labor previously issued guidance on investing in private equity within defined contribution plans during Trump's previous presidency, but few took advantage due to fear of litigation [4].
The executive order signals a policy shift towards modernization and broadening of retirement plan investment options. However, it also raises concerns about complexity, higher fees, liquidity constraints, and transparency challenges associated with alternative assets. Greater education for plan sponsors and fiduciaries will be necessary to manage these risks and comply with fiduciary duties [1][2][4].
[1] https://www.cnbc.com/2025/08/07/trump-signs-executive-order-to-make-it-easier-for-401k-investors-to-invest-in-private-equity.html [2] https://www.reuters.com/article/us-usa-trump-401k-idUSKCN24Z2ZN [3] https://www.bloomberg.com/news/articles/2025-08-07/trump-orders-regulators-to-make-it-easier-to-invest-in-private-equity [4] https://www.wsj.com/articles/trump-plans-to-make-it-easier-for-401k-investors-to-put-money-in-private-equity-11631249455 [5] https://www.axios.com/trump-executive-order-401k-alternative-assets-cryptocurrency-4f4e6b9a-10c4-45e8-a800-f67a3c2c833e.html
- The executive order encourages asset managers, such as BlackRock and Blackstone, to expand their offerings by including alternative assets like real estate and private equity in retirement investments, such as 401(k)s.
- The directive to federal regulators aims to modernize personal-finance practices by facilitating greater access to non-traditional investments, including but not limited to real estate, cryptocurrency, and private equity, within defined contribution plans.
- The technology sector, specifically asset managers operating crypto exchange-traded funds, may benefit from the executive order's emphasis on easing access to cryptocurrencies in 401(k)s, potentially opening up a new investment avenue within the $12-trillion defined-contribution market.
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