Trump Signs Order Allowing Private Equity in 401(k) Plans

WASHINGTON, D.C. — President Donald Trump signed an executive order on August 5, 2025, that paves the way for alternative investments, including private equity, cryptocurrencies, and real estate, to be included in 401(k) retirement plans.

The order directs the U.S. Secretary of Labor to review investment guidance regarding private market assets in 401(k) and other defined contribution plans under the Employee Retirement Income Security Act of 1974 (ERISA). This law sets minimum standards for retirement plans in the U.S.

This move is seen as a significant win for the alternative asset industry, which has long advocated for broader access to private investments in defined contribution plans during Trump’s second term. The news resulted in a surge in private market asset prices on the same day, although those gains were later lost.

Traditionally, private market assets have been excluded from 401(k)s due to high fees, lack of transparency, and extended lockup periods, making them riskier options than other investments. However, previously established guidelines from the Trump administration in 2020 deemed some private market investments permissible under certain conditions, a stance reaffirmed by the Biden administration.

Investment experts express concerns about the inclusion of private equity in retirement plans. Jeffrey Hooke, a professor at Johns Hopkins Carey Business School, commented, “Private equity is often illiquid and carries high fees, which generally do not outperform the stock market.”

The demand for private equity access arises amid challenges in traditional exit routes for private equity firms. Delays in selling off portfolio companies have reportedly reached between 4,000 to 6,500 exits in the last two years, as firms seek liquidity through the $12 trillion 401(k) market.

While experts predict that only about 10% of retirement assets may end up allocated to private equity, they warn of potential risks. “When retail investors enter opaque markets with different liquidity structures, it doesn’t end well,” Payne cautioned. Moody's Investors Service has echoed similar worries, flagging systemic risks with higher retail participation in private markets.

In the evolving landscape of retirement investing, the expansion of private equity into 401(k) plans is a notable shift, with potential long-term consequences for investors. As the executive order starts to take effect, the industry continues to monitor its impact.