On Friday, President Donald Trump signed an executive order directing the Labor Department to clear the way for private equity, real estate, cryptocurrencies, and other alternative assets to enter 401(k) lineups, opening up defined-contribution flows to private markets for the first time.
The directive targets a pool of roughly $12.5 trillion held in individual retirement accounts across a user base of around 90 million participants.
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The order instructs the Department of Labor to revisit its alternatives guidance under the Employee Retirement Income Security Act within the next six months and to clarify fiduciary obligations tied to offering professionally managed asset allocation funds with alternative sleeves.
It also directs Labor Secretary Lori Chavez-DeRemer to coordinate with the Treasury Department, the Securities and Exchange Commission, and other regulators to determine whether additional rule changes are needed to support the effort.
The likely implementation path involves collective investment trusts used as target-date funds or managed accounts, with alternatives limited to a minority allocation. That design, however, forces daily pricing and liquidity at the wrapper level, even when underlying assets are illiquid or valued quarterly.
As Ropes & Gray notes, “This means someone will need to be responsible for striking a daily NAV on the illiquid alternative assets.”
Alongside daily pricing concerns, management of capital calls and fee structures is also top of mind.
Blackstone, KKR, BlackRock, Blue Owl, and Partners Group, among others, have already struck partnerships with 401(k) administrators, and firms have been testing infrastructure around interval funds, tender-offer funds, and CIT sleeves that can plug into target-date strategies.
The remaining overhang is litigation potential: ERISA class actions have targeted fees and performance for decades, and plan committees have been wary of options that bring higher headline fees, leverage, or valuation opacity.
The order does include a safe‑harbor instruction aimed at reducing possible exposure, but that probably isn’t enough on its own. In a client briefing, Kirkland & Ellis notes, “Any meaningful litigation reforms will likely require congressional action.”
The SEC has also been asked to facilitate access for participant-directed plans, including potential changes around investor qualification standards. This means a possible update to accredited investor and qualified purchaser guidelines in consultation with the Labor Department, which could expand the addressable universe of compliant products for participant‑directed platforms.
For sponsors that can navigate a successful roll-out, the door is now open to capture a portion of the untapped, recurring source of capital provided by defined contribution plans. As institutional LPs manage liquidity and run up against private markets allocation limits, individual investors may be the next big growth catalyst for fund managers.