The White House reports that President Donald Trump plans to sign an executive order which will expand 401(k) retirement plans access to alternative assets including private equity and real estate and crypto.
The order requires the SEC to modify existing rules which would enable participant-directed defined contribution plans to include nontraditional investment options. The order requires the Labor Department to work with other regulators for examining parallel reforms. The new policy would enable asset managers who focus on less-liquid higher-risk investments to access the $12 trillion retirement market.
Blackstone together with KKR and Apollo will benefit from this change because it will provide them with new funding opportunities during a challenging fundraising period. BlackRock intends to introduce its retirement fund with private equity and credit assets during the following year because of their lobbying efforts.
The administration supports the order because it promotes portfolio diversification but critics believe alternative investments present excessive complexity and risk to unsophisticated investors. The order will face legal opposition because consumer advocates will fight about insufficient disclosure practices.
Private equity firms have struggled with high interest rates but this initiative presents an opportunity to improve their deal-making activities. The implementation process will extend over time although industry executives acknowledge the initiative will not resolve fundamental industry problems immediately.
