Trump Signs Executive Order to Open 401(k) Plans to Private Markets, WSJ Reports

As of July 16, 2025, President Donald Trump has signed an executive order aimed at expanding access to private market investments, such as private equity, for U.S. retirement savings plans like 401(k)s. The move, first reported by The Wall Street Journal, directs federal regulators to provide guidance that could unlock trillions in retirement assets for alternative investments, potentially benefiting private equity firms while raising concerns about risks and costs for everyday savers.

 This initiative aligns with broader efforts by the private equity industry to tap into the massive pool of retirement funds, amid ongoing debates over investor protections.

The order comes at a time when U.S. defined-contribution plans, including 401(k)s, hold approximately $12.4 trillion to $12.5 trillion in assets, representing a "holy grail" for private market players seeking new capital inflows. Proponents argue it could enhance returns for retirees, while critics warn of higher fees, illiquidity, and potential conflicts of interest.

Details of the Executive Order

The directive instructs the U.S. Department of Labor (DOL) and the Securities and Exchange Commission (SEC) to issue guidance for employers and plan managers on incorporating private market investments into 401(k) offerings. This could include:

• Streamlining fiduciary rules to reduce legal barriers for plan sponsors wary of lawsuits over higher-cost alternatives to traditional index funds.

• Promoting vehicles like target-date funds that bundle private equity with more liquid assets to address liquidity concerns.

• Encouraging disclosures and safeguards to protect participants from undue risks.

While the order does not mandate changes, it signals strong administration support for private equity's expansion into retirement plans, building on prior regulatory tweaks during Trump's first term.

 The White House has framed this as a way to "democratize" access to high-return investments typically reserved for wealthy individuals and institutions.

Background and Industry Push

Private equity firms have long lobbied for greater access to 401(k)s, viewing the sector as an untapped source of stable, long-term capital. Recent developments include:

• A Ninth U.S. Circuit Court of Appeals ruling upheld the dismissal of a lawsuit against Intel's inclusion of private equity in its 401(k), which alleviated some legal fears.

• Firms like Blue Owl Capital are pushing products tailored for retirement plans, such as funds-of-funds that mitigate volatility.

Efforts date back to 2020, when the DOL under Trump issued guidance allowing private equity in specific 401(k) options. Still, adoption has been slow due to concerns over fees (often 1-2% higher than index funds) and illiquidity. The industry sees this order as a "final push" to overcome remaining hurdles.

Potential Benefits and Risks

The policy could reshape retirement investing. Here's a comparison of key aspects:

Aspect	Potential Benefits	Potential Risks
Returns	Higher long-term gains from private equity (historically outperforming public markets by 3-5% annually).	Volatility and potential losses in downturns.
Diversification	Broader exposure to alternatives like venture capital and real estate.	Illiquidity, making it harder to withdraw funds during market stress.
Costs	Access to sophisticated strategies for average savers.	Elevated fees eroding net returns (e.g., management fees up to 2%).
Accessibility	"Democratizing" high-yield investments.	Increased lawsuit risks for plan sponsors, potentially limiting options.
Market Impact	Influx of capital to private markets, boosting innovation and dealmaking.	Systemic risks if retail investors flood illiquid assets.

Data from the article suggests that while private equity has made "strides," only a small fraction of 401(k) assets (less than 1%) currently include such investments.

Reactions and Implications

• Industry Enthusiasm: Private equity giants like Apollo Global and KKR have welcomed the move, with shares rising 1-2% in after-hours trading on July 15. Blue Owl Capital, a key player, sees it as accelerating their push into retirement markets.

• Criticisms: Labor unions and consumer advocates, including the AFL-CIO, argue it exposes workers to unnecessary risks, potentially violating fiduciary duties under ERISA. Democrats in Congress have called for hearings, warning of a "Wall Street giveaway."

• Market and Economic Context: Amid inflation concerns and stock market volatility, the order could inject liquidity into private markets but might fuel debates over retirement security ahead of the 2026 midterms.

Overall, this executive action substantiates industry claims of government support for private market integration, though its success depends on regulatory follow-through and market adoption. Investors should monitor the expected guidance of DOL and SEC in the coming months.

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