The Trump administration is looking into an executive order that might permit private companies to tap into the US retirement savings market via 401(k) plans, according to insiders.
If this order goes through, it will task agencies such as the Labor Department, the Treasury, and the SEC to explore how private funds could be incorporated into retirement plans. This could potentially unlock significant capital for private equity firms, like Blackstone, KKR, and Apollo, with estimates suggesting hundreds of billions could be on the table.
This idea isn’t brand new; it was floated during Trump’s first term, but progress was hindered by concerns over legal liabilities faced by retirement planners. The new directive might bolster legal protections and simplify the adoption barriers that have prevented institutional backing up to this point.
Recently, private equity firms have ramped up their efforts to find a foothold in retirement investment. Companies like Blackstone, Apollo, and KKR have formed alliances with major asset managers, including Vanguard and State Street. Empower, one of the top 401(k) sponsors in the US, has recently committed to providing access to funds managed by Apollo, Partners Group, and Goldman Sachs.
On the regulatory front, there’s a growing willingness to consider changes. SEC Chair Paul Atkins noted that adjustments may be made to the 15% cap on private assets in registered funds, aiming to strike a balance between protecting investors and allowing wider access to private capital approaches.
While some critics within the industry raise concerns about risks like decreased liquidity, high fees, and uncertain valuations, private equity leaders contend that the long-term aspects of private investment align well with the extended timelines associated with retirement savings.
Although final decisions on the executive order are still pending, potential regulatory changes could represent a significant step forward in broadening private equity’s reach into one of the largest global capital pools.
