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President Donald Trump on Thursday signed an executive order that will allow the inclusion of private-market investments and other alternatives in retirement accounts.
The White House said in a fact sheet that the executive order directs the Labor Department to reexamine its guidance on alternative asset investments in 401(k) and other defined-contribution retirement plans, and to clarify the fiduciary process for offering asset allocation funds that include such investments.
Under the order, the Labor Department would coordinate with the Treasury Department and Securities and Exchange Commission (SEC) to determine whether regulatory changes at those and other agencies would be needed to carry out the purpose of the order. The SEC is also directed to take steps to enable access to alternative assets in participant-directed defined-contribution retirement plans through regulatory changes.
Private-market investments, also known as private assets, include private equity, venture capital, real estate and hedge funds that aren’t traded on public exchanges.
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President Donald Trump is reportedly preparing an executive order to expand access to private-market investments in retirement plans. (Aaron Schwartz/CNP/Bloomberg via Getty Images / Getty Images)
Private assets are typically characterized by higher risk and potentially higher returns compared to traditional investments like stocks and bonds that are traded on public markets.
Bryan Corbett, president and CEO of MFA, a trade association that represents alternative asset management options such as private credit and hedge funds, touted the anticipated order as giving investors the ability to further diversify their investment portfolio in a Reuters report.
“Expanding access to alternative investments in 401(k) retirement plans will provide more Americans with the diversification and investment options needed to build wealth and save for a successful retirement,” Corbett said.
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Private-market assets aren’t traded on public exchanges. (Reuters/Andrew Kelly/File Photo / Reuters)
During Trump’s first term, the Labor Department indicated in a 2020 letter that firms may responsibly include private equity in certain investment products like target-date funds if they carefully consider the risks and fees associated with their inclusion.
The Biden administration reversed that policy the following year, with the Labor Department saying it does “not endorse or recommend such investments.”
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Trump is reportedly considering an executive order to expand access to private markets. (Tasos Katopodis/Getty Images / Getty Images)
In anticipation of the Trump administration’s planned move on private-market investments in retirement funds, several firms have taken steps in recent weeks to put out investment products that include such assets.
The Wall Street Journal noted that Apollo Global Management and State Street have released a target-date fund that includes a private-markets component, while Blue Owl Capital indicated this week it will collaborate with Voya on products that include private markets in 401(k) investments.
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Reuters contributed to this report.
