President Trump’s Executive Order (EO) “Democratizing Access to Alternative Assets for 401(k) Investors” continues the move towards incorporating private assets into defined contribution plans. The EO follows the U.S. Department of Labor’s (DOL) 2020 Information Letter, which concluded that plan sponsors could offer funds that include private equity assets without breaching their fiduciary duties. It also follows a May 2025 decision by the Ninth Circuit Court of Appeals, which ruled on long-running ERISA litigation involving Intel Corporation’s inclusion of private assets in its retirement plan funds. The Appeals Court affirmed that the riskiness and cost of individual investments do not mean that plan sponsors act imprudently if those assets are part of a well-designed product for participants.
Potential Impact for Individual Investors
While the President’s EO does not immediately change the landscape for private assets in 401(k) plans, it does initiate a process for improved regulatory guidance, which could lead to broader adoption. At least initially, however, the benefits of greater diversification and potential for higher returns may be more limited than expected.
- Industry leaders expect private assets to comprise a modest portion (5–15%) of multi-asset products offered by plan sponsors, such as target-date funds.
- Depending on how fund managers allocate these assets (private equity, credit, real estate, etc.), the potential incremental annual returns for plan participants could be relatively small – 5 to 50 basis points.
- Over time, compounding these incremental returns could meaningfully increase the assets investors accumulate for retirement. However, evidence suggests that many plan participants increasingly withdraw retirement savings when changing jobs or to cover family emergencies, undermining the long-term benefits of saving.
Creating funds for 401(k) plans may favor large, multi-asset fund managers who can deliver cost-effective products to this complex channel. As a result, 401(k) participants may not have access to smaller and less-established managers and other market segments available to institutional investors. This could create a divergence in expected outcomes between institutional and individual investors. As the 401(k) market expands its investment options, products reflecting the full range of private asset strategies will also be needed for plan participants to realize the benefits often reported for the broader private markets industry.
Steve was formerly the Chief Investment Officer and Head of Private Markets at Manulife Investment Management. In this role, he was responsible for leading global investment teams across a wide range of asset classes, including private equity and credit, real estate, infrastructure, timber, and agriculture. Steve has served as a director of many public and private companies during his career, including two of Manulife’s U.S. SEC-registered investment advisors.
Important Notice: Private Markets Navigator does not provide investment advice, and the information should not be construed as such. Investing in private asset funds is risky, with potential for total loss and long-term liquidity restrictions. Read our full dislaimer.