① On Thursday local time, U.S. President Trump signed an executive order permitting Americans' 401(k) plans to invest in private equity funds, Bitcoin and other cryptocurrencies, as well as other so-called alternative assets;
② This decision marks a significant policy shift in the U.S. pension investment landscape;
③ The executive order paves the way for private equity and other fund management firms to tap into nearly ten trillion dollars of American retirement savings.

On Thursday local time, U.S. President Trump signed an executive order allowing Americans' 401(k) plans to invest in private equity funds, Bitcoin and other cryptocurrencies, as well as other so-called alternative assets. This decision marks a significant policy shift in the U.S. pension investment landscape.

The executive order paves the way for private equity and other fund management companies to utilize trillions of dollars of American retirement savings. This could open up a vast new source of funds for alternative asset managers beyond stocks, bonds, and cash. However, critics argue it could also introduce excessive risk to retirement investments.

The summary of the executive order released by the White House stated: "The Securities and Exchange Commission (SEC) must consider pathways to facilitate access to alternative asset investments for participants in defined-contribution retirement plans."
The executive order directs the Secretary of Labor, in consultation with the Treasury, SEC, and other federal regulators, to "re-examine" previous guidance.

This move is seen as a major victory for the alternative asset management industry, which had actively lobbied early in Trump's second term to increase the penetration of private assets in defined-contribution retirement plans.

This could benefit major alternative asset managers like Blackstone (Blackstone Group L.P.(BX.US)), KKR (KKR & Co. L.P.(KKR.US)), and Apollo Global Management (Apollo Global Management, LLC Class A(APO.US)), which stand to attract substantial inflows.

According to data released by the Investment Company Institute, Americans held approximately $8.7 trillion in assets in 401(k) accounts as of the first quarter of 2025.

BlackRock (BlackRock, Inc.(BLK.US)), the world's largest asset manager, plans to launch its own retirement fund next year, including private equity and private credit assets.

This executive order is undoubtedly a significant positive development for the cryptocurrency industry as well. This reform is the latest move by Trump to support the crypto sector, following several crypto-related bills already passed by Congress.

The Head of Global Market Insights at crypto-focused asset manager Hashdex Asset Management (Hashdex Nasdaq Crypto Index US ETF Units of fractional undivided beneficial interests(NCIQ.US)) stated: "Bitcoin (Coinbase(COIN.US)) (ProShares Bitcoin Strategy ETF(BITO.US)) (Strategy (MSTR.US))  has evolved beyond its early stage as purely a speculative asset and is gradually entering the long-term investment strategies of many investors. This executive order will help accelerate that trend."

Mixed Reactions

In defined-contribution plans, typified by the 401(k) plan, employees contribute to their own retirement accounts, often with matching contributions from employers. The invested funds belong to the employee, but unlike defined-benefit pension plans, there is no guarantee of regular income for the employee after retirement.

Traditionally, alternative assets like private equity have been excluded from 401(k) plans due to high fees, insufficient disclosure, and longer lock-up periods making investments riskier, although some pensions and university endowments have long included them in their allocations.

Regarding Trump's move to allow pension investments in alternative assets, supporters believe it can help retirement savers diversify their investments, potentially increase returns, and promote the development of financial markets.

Opponents, however, state that alternative assets like private equity carry higher fees and greater risks compared to traditional investments.

"On the asset manager side, this is a $12 trillion retirement market they previously couldn't access. For them, this undoubtedly represents a huge opportunity," said Morningstar analyst Jason Kephart. "However, from the individual investor's perspective, after considering all the extra fees, added complexity, and lower transparency, the picture becomes less clear."

Compared to publicly traded stocks and bonds that most retirement funds rely on, these new investment options have lower disclosure requirements and are typically harder to sell quickly. Investing in them also often comes with higher fees.

Because of this, industry insiders worry this change could trigger lawsuits.

A private equity executive indicated that whatever outcomes result from Trump's executive order, they are unlikely to happen overnight. Lawyers are already preparing for potential lawsuits from investors who may not understand the complexity of this new investment form.