President Donald Trump‘s recent executive order has opened the door for alternative investments to be included in 401(k) plans, potentially reshaping how the savings of millions of Americans are managed.
In the order, entitled “Democratizing Access to Alternative Assets for 401(k) Investors,” the president laid out a road map for the incorporation of such assets, including private equity, real estate and cryptocurrency, into Americans’ retirement accounts.
What to Know
The executive order does not alter existing laws around workplace retirement plans, but instructs the Department of Labor to examine how to revise guidance to make such investments more accessible. However, the announcement marks a major win for those in the respective asset industries, who have long been lobbying for a chance to tap into the roughly $12.2 trillion held in retirement savings plans.
President Donald Trump listens to questions from reporters in the Oval Office on August 07, 2025 in Washington, DC. Coins in a jar.
President Donald Trump listens to questions from reporters in the Oval Office on August 07, 2025 in Washington, DC. Coins in a jar.
Win McNamee //Getty Images / GDA via AP Images
“For decades, public pension funds have invested in private assets because they deliver strong returns over the long term and are a smart, safe way to diversify retirement savings,” said Will Dunham, president of the American Investment Council, a trade association and lobbying group that represents the U.S. private equity industry. “President Trump’s EO [executive order] is a great step that will help all Americans enjoy the same benefits of stronger returns and a secure retirement.”
But others believe retirement portfolios should be conservatively managed, and are wary of introducing any additional complexities or risk, as well as the higher fees that could themselves eat into savings.
“Alternative investments are typically less liquid and volatile, meaning that investors may not have immediate access to funds and are likely to be exposed to more risk,” said economist Gopi Shah Goda, director of the Brookings Institution’s Retirement Security Project. “They also typically carry higher fees, dipping into the return premiums mentioned earlier.”
Newsweek spoke with attorneys and private equity experts about what those participating in the plans—and those benefiting from them—need to know before embracing these new investment options.
What Administrators Need to KnowSimon Tang, Accelex
“For administrators, the biggest challenge is the transparency gap,” said Tang, director and head of U.S. at Accelex, a fintech firm that provides tools for private markets investors.
“General partners of private funds are steadfast in maintaining privacy and confidentiality when it comes to their investments in private companies, which should drive their competitive advantage over other fund managers,” he told Newsweek. “However, retail investors will expect the same clear, timely information that they’re used to in public markets and even in crypto but where private equity still falls short.”
To bridge this transparency gap, Tang said administrators will “need to invest in private markets-specific AI and automation to access, extract, standardize, and present insights to the retirement investors; otherwise, they risk losing these investors to competitors who can.”
Bill Cox, KBRA
“Private markets are a source of systemic strength, and their democratization can benefit both retail and institutional investors when accessed with proper due diligence and understanding of their unique characteristics,” said Cox, head of corporate, financial, and government ratings at the New York-based rating agency.
Cox told Newsweek that expanding into alternative assets “requires careful consideration of liquidity risks, fee structures, and the critical importance of manager selection.”
“Performance variability will have far more to do with which managers 401(k) investors select, rather than whether they allocated to alternatives, and we expect this manager differentiation to grow over the next 3-5 years,” he said.
Carol McClarnon, Carlton Fields
McClarnon, an attorney specializing in the financial services industry, said the main thing plan sponsors and fund managers must be aware of is increased “litigation risk.”
“There are law firms that focus on filing ‘excessive fee’ lawsuits against 401(k) plan sponsors and financial professionals,” she told Newsweek, but noted that Trump’s executive order also instructs the Department of Labor to address this in its upcoming guidance.
“Plan sponsors and employees who are open to private equity but lack the expertise can focus on pooled investment funds that are managed by advisers with significant expertise,” she added.
John Hunt, Sullivan & Worcester
“Currently, the biggest exposure is to plan fiduciaries, and the liabilities they have in deciding which investments to make available to plan participants,” said Hunt, a partner at the global law firm.
“For both plan fiduciaries and employees, the most significant questions are understanding the risks and expenses of alternative investments, that is, how financially literate do they need to be before it is prudent for them to invest in these types of investments,” he said.
Tom Hogan, Haynes Boone
Hogan, employee benefits counsel at the corporate law firm, said that the higher fees associate with private equity could “subject the plan sponsor to fiduciary litigation.”
“A plan sponsor is subject to a fiduciary standard of care and prudence under the Employee Retirement Income Security Act of 1974 (the statute that applies to private sector retirement plans) when selecting or monitoring investments.”
Hunt noted that there also exist “liquidity and valuation issues,” given alternative investments are not easily sold or converted to cash, and that the clear, real-time value of private equity is hard to determine.
The Private Equity Stakeholder Project (PESP)
Private market assets are “are harder to value and harder to exit,” the private equity watchdog told Newsweek.
“It’s harder to know what something is really worth. Unlike stocks, private equity funds don’t trade on an exchange, so the value is based on what the fund says it’s worth. That makes it easier to get wrong—and could lead to disputes or lawsuits from workers if they feel they didn’t get a fair deal.”
The group added that private equity “often reports returns in ways that make them look better than they are.”
“Without clear, standardized yardsticks, it’s hard for plan managers to tell if the investment is actually worth it.”
What Employees Need to KnowSimon Tang, Accelex
“For employees, there are several concerns of private equity investing including the higher fees, inherent complexity and opacity, and also the unique return, risk and liquidity profile of this asset class,” said Tang. “Resolving these concerns will require substantial education and data-driven knowledge transfer.”
“Another key risk that needs to be examined and understood is asset allocation and portfolio construction,” he told Newsweek. “The general public is used to parking their paycheck money in a 401(k) and then simply selecting from the different flavors of listed equities and bonds.”
Introducing private equity into this mix, Tang believes, will require employees “to determine their exposure and diversification goals,” as “allocating their entire 401(k) to private equity would indeed be a risk.”
“Anyone considering allocating part of their retirement savings to private equity should understand and educate themselves on the nuances, advantages and disadvantages of private equity,” he added. “And they should expect a very different experience from the instant pricing and real-time updates of public markets.”
Rob Sichel, K&L Gates
Sichel, a partner at the global law firm, said the main risk for plan participants will be in “ensuring that they are investing in products that have been prudently designed to effectively operate within a defined contribution plan.”
In other words, participants must first understand whether a fund has sufficient liquidity and manageable fees, and whether it is “overseen by a fiduciary with sufficient expertise.”
“Even if such an investment is available in a plan’s investment lineup, plan participants should make sure an investment is prudent given the participant’s specific situation,” he added.
Private Equity Stakeholder Project (PESP)
“Higher costs eat into savings,” the watchdog told Newsweek. “Private equity funds usually charge much higher fees than index funds—sometimes multiple layers of them—and those fees add up over time, leaving you with less money at retirement.”
It added that money in private equity investments is typically “locked up longer.”
“You can sell a stock or bond fund any day. With private equity, you may have to wait years to get your money out, and even then, you might get less than you expect.”
PESP was also surprised that the executive order encouraged investments in private equity, given that private equity funds have largely underperformed the S&P 500 over the past few years.
Russ Ivinjack, Aon
“For employees, it means potentially higher costs and less liquidity,” said Ivinjack, Aon’s global chief investment officer.
“Unlike public equities, private investments don’t offer daily pricing or straightforward disclosures,” he told Newsweek. “That’s why we recommend using private assets only in professionally managed portfolios, like target date funds, where trained fiduciaries are making decisions on your behalf.”
What Happens Next?
As the experts noted, the executive order only instructs the Department of Labor to review existing regulations and guidance around alternative investments.
“At the moment, there are no formal proposals,” said John Hunt of Sullivan & Worcester. “Just a direction to the DOL to think about and come up with a plan—and thus nothing to react to other than the optimism of potential changes.”
“This isn’t an overnight transformation,” Simon Tang told Newsweek. “Private equity won’t suddenly appear in every 401(k) plan.”
“Returns can be attractive, but fees are higher, investments are less liquid, and performance data is harder to come by,” he added. “It remains to be seen how this change will be implemented.”
Trump gave the Department of Labor 180 days to reexamine guidance and clarify the government’s position on alternative assets—including private market investments, real estate interests and digital assets—in 401(k)s.