President Donald Trump is currently considering a new executive order that would push U.S. agencies to let private equity firms tap into the country's huge 401(k) savings pool, which is worth almost $9 trillion.
What Happened: Trump's team is drafting an order that would direct regulators like the Labor Department, Treasury, and SEC to assess allowing 401(k) plans to invest in private capital markets.
According to the Financial Times, this could include buyout funds, real estate deals, and other alternative assets. Trump had expressed support for similar access in his first term, but legal concerns over fiduciary liability delayed adoption.
See Also: Legendary Investor Jeremy Grantham Warns Of 50% Stock Market Crash
Why It Matters: If the order is issued and retirement plan providers get the go-ahead, key private equity firms like Blackstone, KKR, and Apollo could obtain access to a new stream of capital from ordinary American workers. Long-term savers are likely to benefit from the potentially higher returns of private investments. However, steep fees, limited liquidity, and murky asset valuations may lead to challenges.
Existing rules restrict how much of a fund's portfolio can be tied up in private assets, but regulators have already indicated their inclination to relax those caps. SEC Chair Paul Atkins recently hinted that the agency may ease current limitations to give all investors wider exposure to alternative investments.
This report comes just as House Republicans have revised key parts of their proposed spending cuts targeting federal employee retirement benefits, softening some of the most controversial measures in response to internal opposition and growing criticism from federal workers and advocacy groups.
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