Trump is moving fast on private equity in 401(k) plans
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It's been a week since President Trump issued an executive order to encourage 401(k) investment in private equity, and the biggest surprise so far is how quickly the rest of his administration has activated.
Why it matters: There will be a steep learning curve for all participants, but it can't really begin until the White House does its foundational work.
Driving the news: The Labor Department on Tuesday rescinded a Biden-era statement that cautioned retirement plan fiduciaries against including private equity in 401(k) plans.
- According to DOL, that statement "had a chilling effect on the market and took a dismissive view of alternative assets and the capabilities of plan fiduciaries."
But wait, there's more: Also on Tuesday, the Council of Economic Advisors published a 31-slide presentation on the implications of 401(k) plans including alt asset options.
- Not surprisingly, it finds there to be "significant benefits." Not only for retail investors and PE fund managers, but also for the broader economy.
- Per the report: "We estimate that a full loosening of the cap would lead retirement plans to allocate around 20% of their portfolio to private equity, which translates into an extra $35 billion in aggregate output, or around 0.12% of GDP."
- One big caveat is that much of the CEA's underlying data is based on PE funds with vintages running through 2014, which may not fully capture the more recent DPI disappearance.
Flashback: All of this is a far cry from what happened during Trump 1.0, when the Labor Department issued guidance to smooth the path for PE participation in 401(k) plans.
- That initiative came near the end of his term, and quickly was overwhelmed by campaign politics and left to wither on the vine (before Biden took office and reversed Trump's policy).
Look ahead: The Labor Department and SEC still have plenty of work ahead of them, much of which comes with February 2026 deadlines. So far, however, they seem to be eager for the task.
