Alt Investments
Private Market Assets In Your 401(k)? Trump Might Put That On The Menu

The move, if it happens, adds another twist to debate on how wide access should be made to private market investment, given the opportunities and risks involved.
Media reports this week said that President Donald Trump is about to sign an executive order that would allow employees to invest in private assets through their 401(k) retirement plans. No details have been issued at the time of this publication going to press.
If the move happens, it will follow the bill passed in late June
by the US House of Representatives directing the Securities
and Exchange Commission to expand
the eligibility requirements for participating directly in
private investments.
Advocates for widening access to these assets say they’re
increasingly important return drivers – particularly because
fewer firms are listed or take longer to go to IPO, and
that risk-adjusted returns are superior. Against that, critics
fear that ordinary investors will not like the higher fees,
capital calls and other complexities that typically form part of
the package.
In recent years there has been a relentless drumbeat of calls to
widen access to private markets. A decade-plus of ultra-low
interest rates, for example, crushed yields for listed stocks and
bonds and fueled demand for alternative assets. Traditionally, a
field such as private equity is a rich person’s game requiring at
least $1 million of investment. There has been movement toward
more “fractional” investment, tokenization via the blockchain,
using listed funds holding alternatives, and “evergreen,”
open-ended structures. In Europe, the UK government is advocating
using its Long Term Asset Fund legal structure to be held – if
suitable – in retail savings funds, and in Europe, ELTIF funds
are available.
A Bloomberg report on the 401(k) story said that fewer
than one in 10 retirement plans in the US offer any kind of
alternative investment option; and only 2.4 per
cent make private equity available, citing data from an
American Retirement Association survey.
Double-edged sword?
"There's no escaping the fact that retail investors will be a
huge growth area for private markets. This significant potential
is encouraging the private equity industry to broaden its reach,
opening up the space to enable a broader range of investors to
participate,” Michael Aldridge, president and chief revenue
officer at private markets tech firm Accelex, said in comments
emailed to Family Wealth Report.
"However, this is a double-edged sword. Private markets are
notorious for their lack of transparency, with even seasoned
institutional investors struggling to get the data and visibility
they need to make smart decisions in the space. For retail
investors investing their 401(k)s, this lack of clarity could
mean taking on risks without having a full picture of the
investment.
“Fund managers opening up private markets to retail investors
must take strong measures to improve clarity over private assets'
valuations and performance to ensure they can make informed
decisions and have full visibility of where their hard-earned
money is going,” he added.
His remarks add to
skepticism about how far the door should be
widened.
On the accredited investor theme, at present, those bearing that
title must have $1 million in net worth, excluding their primary
residence or an annual income of $200,000, and $300,000 in income
for joint spousal investors. To broaden access to private
markets, new legislation would expand the definition of an
accredited investor under what is known as Regulation D to
include people with professional-level knowledge through either
their work experience or education, which would explicitly
include registered brokers and investment advisors.