President Donald Trump has signed an executive order permitting private equity and other alternative assets, such as private credit, real estate, and cryptocurrencies, to be included in 401(k) retirement accounts. Federal rules currently discourage most defined-contribution plans from investing in such assets, viewing them as a breach of fiduciary duty, which has limited investments largely to stocks and bonds. Trump issued similar guidance in his first term to relax these rules, but it was rescinded under President Biden. The new order goes further, directing the Department of Labor to review current rule interpretations within 180 days and propose changes if needed, and instructing the SEC to adjust its rules and guidance to better enable retirement plan investments in alternative assets.
The move could open trillions of dollars in potential funding for private equity as traditional sources, such as public pensions, family offices, and endowments, scale back due to weaker returns, and it may also boost cryptocurrency markets, with Bitcoin prices already rising ahead of the signing. The expanded investment scope could create opportunities for CFOs to diversify corporate retirement plans, though it will require rigorous evaluation of risk, liquidity, and regulatory compliance. Plan administrators may remain cautious given high fees, long holding periods, redemption limits, and transparency issues associated with alternative assets. While the executive order signals a policy shift, its ultimate effect will depend on the final rules developed by regulators in the months ahead.
