Trump signed an executive order allowing 401K accounts to invest in cryptocurrencies, private equity funds, and other alternative investments
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Trump signed an executive order allowing 401K accounts to invest in cryptocurrencies, private equity funds, and other alternative investments
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Trump signed an executive order to open 401K retirement plans to alternative assets such as private equity.
On Thursday, U.S. President Trump signed an executive order allowing alternative assets like private equity, real estate, and cryptocurrencies to enter 401K retirement savings plans, opening the door to approximately $12.5 trillion in retirement account funds for these industries.
The executive order directs the U.S. Securities and Exchange Commission (SEC) to revise relevant regulations to facilitate investment in alternative assets through participant-directed defined contribution retirement savings plans. Previously, such retirement plans typically invested in relatively safe stocks and bonds.
According to reports, Trump will use this order to instruct the U.S. Labor Secretary to re-examine fiduciary duty guidance regarding investments in alternative assets, and direct her to consult with Treasury Secretary Besent and the SEC to determine what regulatory changes can be made.
White House officials said Trump signed the executive order to provide American workers with more investment options, believing that alternative assets such as private equity, real estate, and digital assets can offer competitive returns and diversification benefits.
Analysts believe this move will bring a significant capital injection to the capital-hungry private equity industry and is also a key component of Trump's push to advance the cryptocurrency sector.
New Opportunity for the Asset Management Industry?
The White House has been weighing this directive for months, aiming to ease long-standing legal concerns that have hindered alternative assets from entering most employee-defined contribution plans. Retirement portfolios have primarily focused on stocks and bonds, partly because corporate plan managers are reluctant to engage with illiquid and complex products.
This move echoes measures taken during Trump’s first term, when the Department of Labor issued guidance stating that retirement plan managers would not violate their fiduciary duties by including private equity in portfolios. That guidance was later withdrawn during the Biden administration.
Both alternative asset firms and traditional asset managers are eager to tap into the defined contribution market, viewing it as the next growth frontier. Institutional investors such as U.S. pension funds and endowments have already reached internal caps on allocations to private equity amid generally slowing deal activity and insufficient client distributions.
Opening private market products to 401Ks would give savers more investment choices, supporters argue, potentially leading to higher returns. But it also brings greater risks and higher fees, potentially exposing retirement plan managers to litigation.
Aligning with Cryptocurrency Policy Push
This initiative aligns with Trump’s efforts to promote the cryptocurrency industry. Last month, Trump hosted a "Crypto Week" event at the White House and signed the first federal stablecoin regulation law. He also appointed David Sacks, a venture capitalist at Craft Ventures LLC, as the first White House AI and Crypto Czar.
In March, Trump hosted industry leaders at the White House and signed an executive order directing the creation of a strategic Bitcoin reserve and other digital asset reserves. According to the Bloomberg Billionaires Index, several cryptocurrency projects launched by Trump and his family have added at least $620 million to his net worth in recent months.
Asset management firms have argued to policymakers that as public markets shrink, savers’ portfolios fail to reflect changes in the financial industry. Since peaking in the 1990s, the number of U.S. publicly listed companies has declined significantly, while private equity assets more than doubled over the decade ending in 2023.
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