On August 7, 2025, President Donald Trump signed an executive order instructing federal agencies to revisit and revise the regulatory framework governing 401(k) and other defined contribution retirement plans. Its primary stated purpose is to “democratize” access to alternative assets- historically understood as investments accessible only to the wealthy, pension funds, and institutional investors-as a wider venue for ordinary workers to diversify and potentially earn higher long-term returns. The order instructs the Department of Labor (DOL), coordinated with the Department of Treasury and the Securities and Exchange Commission (SEC), to assess the existing fiduciary guidance within 180 days and to propose any necessary rule changes or guidance.
Defining alternative assets
The executive order gives a broad definition of alternative assets, which includes:
- Private market investments, regardless if they be through private equity or private credit.
- Direct or indirect real estate interests, and real estate-backed debt instruments;
- Actively managed vehicles holding digital assets, such as cryptocurrencies;
- Commodities;
- Infrastructure financing projects; and
- Lifetime income strategies, including longevity risk-sharing pools (tontines).
The administration seeks to level the playing field between mainstream 401(k) investors and those with access to specialized funds by codifying these categories.
Regulatory process and timing
Although the order by itself does not amend ERISA or securities laws, it initiates a rulemaking process that will likely drag into 2026. Key steps involve:
- DOL Review of Fiduciary Duty: Within 180 days, the Department of Labor must develop new guidance to review past advice concerning alternative assets- rescinding onerous memos from the previous administration.
- Clarifying process and safe harbors: The DOL will issue guidance or rules as to the prudent process in fiduciaries evaluating alternative investments, possibly creating safe harbors to mitigate litigation risk.
- Mark on regulatory coordination: The DOL will work with Treasury and SEC in the changes across agencies. The SEC must, in turn, consider amendments to the definitions of accredited investor and qualified purchaser to facilitate access to more people.
According to the White House fact sheet, these new options might not be available until 2026, given the time that notice-and-comment rulemaking and preparation of the industry require.
Potential benefits to retirement savers
Advocates argue that adding alternative assets to a 401(k) menu can broaden diversification and offer net risk-adjusted returns for several decades. Private equity-which has outperformed public stocks historically-as well as real estate and infrastructure, can provide stable returns that are typically inflation-protected.
“Private investments in 401(k) plans have potential for improving outcomes for participants as they open the range of investments that are commonly made available to professional institutional investors,” said AON global head of investments Ari Jacobs. Research also claims that a marginal 10% allocation to private equity within professionally managed target-date funds could dramatically uplift the future income streams of pension retirement benefits.
Risks and threats in the market
Maybe it’s the fact that alternative assets have great promise:
- Liquidity restriction: In real estate, private equity, and infrastructure, an investor usually has to tie his or her capital for a certain period and give redemption opportunities at a very limited basis.
- Complexity in valuation: Fair market values for those non-publicly traded assets depend more on appraisals at certain time intervals than on continuous pricing in the market.
- Higher fees: Cost ratios tend to be much higher for actively managed and specially structured strategies than for traditional mutual funds.
- Varied risks with volatility and operations: Digital assets illustrate the most rapid price swings along with continuously evolving custody and regulatory challenges.
Financial advisors have warned that the plan sponsors and participants need to carefully analyze the skill of the manager, fee structure, and the appropriateness of them to the retirement timing of the participants.
Industry direction and product strategy
In anticipation of this rulemaking, the big asset managers and record keepers have already embarked on plans to develop collective investment trusts (CITs), interval funds, and revamped target-date funds with alternative allocations. Some product packages are set to partner for multi-strategy vehicles that blend exposure in private credit, real estate, infrastructure, all with the capacity to offer an overlay mechanism for daily liquidity.
In short, research at Neuberger Berman indicates that retirement products, well managed without reliance on the participant to manage complexity as well as liquidity risk, will have possible integration of private markets.
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