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CNBC
08-08-2025
- Business
- CNBC
Trump signs order allowing alternative assets like cryptocurrencies, private equity in 401(k)s
Key Points President Donald Trump signed an executive order that clears a path for alternative assets to be added into 401(k)s. The executive order directs the U.S. Secretary of Labor to review fiduciary guidance on private market investments in 401(k) and other defined contribution plans. The executive order is a major victory for private asset managers, who have pushed for greater adoption of alternative assets in defined contribution plans during Trump's second term in office. U.S. President Donald Trump waves from the roof of the West Wing of the White House as he takes a tour on August 05, 2025 in Washington, DC. Win Mcnamee | Getty Images News | Getty Images President Donald Trump signed Thursday an executive order that lays the groundwork to add alternative assets such as private equity, cryptocurrencies and real estate into 401(k)s. The executive order directs the U.S. Secretary of Labor to review fiduciary guidance on private market investments in 401(k) and other defined contribution plans that are governed by the Employee Retirement Income Security Act of 1974, or ERISA. The federal law sets minimum standards for most retirement plans. The executive order marks a major victory for the alternative asset industry, which has pushed for greater adoption of private assets in defined contribution plans under Trump's second term in office. Though it also brings with it new risks for investors. Bitcoin jumped Thursday in response to the news. Private market assets have traditionally been excluded from 401(k)s, even as they've been embraced by pension funds and university endowments, because their high fees, lack of transparency and longer lockup periods make them riskier investments. Yet, private market exposure in 401(k) plans was considered permissible in 2020, when the Department of Labor under the first Trump administration issued an information letter saying it could be appropriate for defined contribution plans under certain conditions. The guidance was later affirmed by the Biden-directed agency. Its presence has already grown. Asset managers and plan sponsors have created products for retirement vehicles in which Americans collectively hold roughly $8.7 trillion in assets, according to data on 401(k)s at the end of the first quarter of 2025 from the Investment Company Institute. In June, BlackRock, the world's largest asset manager, said it's launching a 401(k) target-date fund in the first half of 2026 that will include a 5% to 20% allocation to private investments. In May, Empower, the country's second-largest retirement plan provider, said it's joining asset managers such as Apollo to start allowing private assets in some accounts later this year. BlackRock and Apollo both traded higher earlier Thursday, but the stocks gave up those gains. BlackRock closed down 0.7%, while Apollo shed 3.3%. KKR fell 1.6%. — With reporting by CNBC's Megan Cassella. Don't miss these insights from CNBC PRO Nvidia gets price target hike from Goldman Sachs ahead of earnings A bearish 'double top' pattern just formed in the Dow. What that means The charts show Tesla shares could be on the verge of a big swing, Katie Stockton says Caterpillar, Eaton reports show hit from tariffs, cast doubt on 2025′s hottest Wall Street trade
CNBC
07-08-2025
- Business
- CNBC
Trump order will allow alternative assets like cryptocurrencies, private equity in 401(k)s
President Donald Trump will sign an executive order on Thursday to allow alternative assets such as private equity, cryptocurrencies and real estate into 401(k)s, according to a senior White House official. The executive order will direct the U.S. Secretary of Labor to review fiduciary guidance on private market investments in 401(k) and other defined-contribution plans that are governed by the Employee Retirement Income Security Act of 1974 (ERISA). The federal law sets minimum standards for most retirement plans. Trump has an executive order signing scheduled at noon. The development was first reported by Bloomberg News. An executive order would mark a major victory for alternative asset industry, which has pushed for greater adoption of private assets in defined contribution plans under Trump's second term in office. Bitcoin jumped on Thursday in response to the news. Private equity stocks such as Apollo Group were slightly higher on Thursday in early trading. Private market exposure in 401(k) plans was considered permissible in 2020, when the Department of Labor under the first Trump administration issued an information letter saying it could be appropriate for defined contribution plans under certain conditions. The guidance was later affirmed by the Biden-directed agency. But its presence is starting to expand. Asset managers and plan sponsors have created products for retirement vehicles in which Americans collectively hold roughly $8.7 trillion in assets, according to data on 401(k)s at the end of the first quarter of 2025 from the Investment Company Institute. In June, BlackRock, the world's largest asset manager, said it's launching a 401(k) target date fund in the first half of 2026 that will include a 5% to 20% allocation to private investments. In May, Empower, the country's second-largest retirement plan provider, said it's joining asset managers such as Apollo to start allowing private assets in some accounts later this year.
CNBC
13-07-2025
- Business
- CNBC
Coming to a 401(k) near you: Private market assets
Apollo Global Management CEO Marc Rowan told attendees at an investor conference last month that the day will soon come when private assets are accessible in Americans' retirement accounts. "I would expect at some point, in this administration's history or in the future, to be able to sell private markets into the 401(k) system," Rowan said on stage at the Morningstar Investment Conference in Chicago, Illinois, where the convergence of private and public markets was a major theme. Those comments come as no surprise from the billionaire CEO, who has long stressed the growing importance of private markets in investing. However, the idea is reaching a tipping point. Private market exposure in 401(k) plans was considered permissible in 2020, when the Department of Labor under the Trump administration issued an information letter indicating it could be appropriate for defined contribution plans under certain conditions. The guidance was later affirmed by the Biden-directed agency. But its presence is starting to expand. Asset managers and plan sponsors have created products for retirement vehicles in which Americans collectively hold roughly $8.7 trillion in assets, according to data on 401(k)s at the end of the first quarter of 2025 from the Investment Company Institute . In June, BlackRock, the world's largest asset manager, said it's launching a 401(k) target date fund in the first half of 2026 that will include a 5% to 20% allocation to private investments. In May, Empower, the country's second-largest retirement plan provider, said it's joining asset managers such as Apollo to start allowing private assets in some accounts later this year. Those developments come amid a broader push under Trump's second term in office to expand the definition of "accredited investors" to allow more people to invest in private markets through their 401(k)s. Within the retirement plan industry itself, the conversation is reaching a fever pitch. Bonnie Treichel, chief solutions officer at Endeavor Retirement, said, "If you're at retirement plan-related conferences right now, this topic is all the rage, so to speak." Similarly, Fred Reish, a partner at law firm Faegre Drinker said: "It's not just out there somewhere on the horizon, I would say that's in the immediate future." How it works The strategies created for 401(k)s thus far will be coming in the form of pooled investments such as collective trusts, or managed accounts overseen by professional investors, instead of standalone investments assessed by individual employees. Adding private assets to target date funds, which automatically adjust allocations based on a retirement date, is one option that's growing in popularity in the industry. The structure of those investments are meant to address some of the regulatory concerns around the assets, which have traditionally been excluded from 401(k)s even as they were embraced by pension funds and university endowments. The treatment stems from the perception that private investments have risks such as a lack of transparency, which raises predatory concerns, as well as higher fees and long lockup periods. The 2020 Labor Department information letter also attempted to address those concerns, outlining that investments into private assets made within 401(k)s must be done with prudence, or held to the standard of a person who is "familiar with such matters," without which a company or an asset manager can open themselves up to legal ramifications. "If fiduciaries make a bad investment, not bad an outcome, but bad both in outcome and bad in that they didn't really vet it properly, they can be sued, and they can be personally liable for damages," said Reish, who specializes in the Employee Retirement Income Security Act of 1974 (ERISA) that governs employee retirement plans. "So, not just the company, but also each individual member of the plan committee. Each of those officers and managers that serves on the plan committee can be personally liable. That's frightening." Intel, for example, had a lawsuit dismissed earlier this year by a federal appeals court in San Francisco after a yearslong dispute over its use of alternative assets in its retirement plans. Additionally, what that could also mean is that larger plan sponsors, which have the internal capabilities to vet private investments, could move faster to integrate privates into a 401(k) plan, rather than smaller companies. The case for privates Still, there are several reasons for the excitement around private assets in 401(k) plans. Proponents point out that the investable universe has shrunk over the last three decades, roughly halving to about 4,000 companies from more than 8,000 back in the 1990s, according to the Center for Research in Security Prices. At the same time, the dominance of the largest public companies grows increasingly pronounced with each passing year. CRSP found that the market cap of the top 10 companies accounted for 35% of the total market in 2024, more than double what it was before 2020. Meanwhile, more companies are staying private for longer. The decision helps executives build their businesses away from the glare of regulatory scrutiny or responsibilities to shareholders, but also makes it harder for investors to get in on the ground floor of the next Microsoft or Apple. Thus, the argument goes, private assets will give investors exposure to a market that looks markedly different from what it had in the past — even if it requires locking up capital for longer periods of time at greater cost and greater risk. Still, there are many who worry the risks far outweigh any benefits, calling private investments far too opaque for plan sponsors to do appropriate due diligence. "Being private does not make it better. It makes it less liquid," Apollo's Rowan told investors at the Chicago conference. "Our job is to deliver excess return."
