Earlier this month, President Donald Trump signed an executive order titled “Democratizing Access to Alternative Assets for 401(k) Investors,” directing the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) to explore ways to include private market investments and crypto in retirement plans. The order argues that American workers should have access to the same alternative investment opportunities long available to institutions and the wealthy. What what does this all mean for holding private equity in your 401(k)?
What Trump’s Executive Order Sets in Motion
With its bold framing, the order has already prompted some regulatory policy shifts. The SEC was asked to revisit accredited investor and qualified purchaser rules that currently limit retail participation. And indeed, earlier this week, the SEC issued guidance in ADI 2025-16 ending the 15% private investment limit in registered closed-end funds and related practices in place since 2002. The DOL, meanwhile, must reconsider past guidance on fiduciary duties under ERISA, including whether to establish safe harbors for fiduciaries who add private assets to 401(k) menus.
The private equity (PE) industry has been preparing for this opening. With more than $12 trillion in defined-contribution retirement accounts, the 401(k) market is an enormous opportunity. And Trump’s executive order comes at a moment when private capital firms face a liquidity crunch: since 2018, capital calls have outpaced distributions by $1.5 trillion, according to Morgan Stanley. That imbalance is pushing managers to look toward retail dollars.
Measuring Private Equity’s Appeal and Trade-Offs
Still, access is not the same as advantage. Ludovic Phalippou, professor at Oxford’s Said Business School, warns that private equity’s favored performance metric—the internal rate of return (IRR)—is a “mathematical artifact” that flatters results. If IRR claims were taken literally, he notes, modest 1970s funds would today be worth trillions—numbers that defy reality.
Even when presented cleanly, PE performance may be more incremental than transformational. Of course, the time period of observation is key. Hamilton Lane, a leading private markets investor, calculates that $1 invested in private equity over the past decade would now be worth $3.96. That solid return edges out the S&P 500 ($3.51). Yet the gains come with trade-offs—illiquidity, opaque valuations, and higher fees—that can matter more to individuals than to large institutions.
Diversification claims also deserve a second look. Private equity is still equity. While PE managers stress operational improvements and active ownership, today’s higher interest rates and thinner IPO pipelines expose the limits of the model. The easy returns of the 2010s may not repeat.
Another hurdle lies in fiduciary duty. ERISA requires plan sponsors to act solely in the interests of participants, leaving them vulnerable to lawsuits if high-fee, illiquid assets are added without clear justification. This litigation risk has kept most fiduciaries away from alternatives. As the Financial Times reported, firms like Apollo and BlackRock lobbied aggressively for the order, but ultimately the DOL—and the courts—will decide whether these products can withstand scrutiny.
How the Industry is Adapting to Retail Access
So the question lingers: will PE firms offer some of their best opportunities to retail investors—or their leftovers? Some skepticism is warranted, but there are already signs of good faith.
Take KKR. The firm recently renegotiated terms with some institutional investors, increasing the carve-out share from the traditional 7.5% to as much as 20%. The change helps KKR deploy the increasing amounts of cash they are raising from individuals in perpetual vehicles. While controversial, the shift shows a willingness to integrate retail investors on a more equity footing.
Even with such examples, executive action alone won’t deliver democratization. Regulators must craft rules that are protective yet practical–safe harbors for fiduciaries, updated investor eligibility standards, and far greater transparency on fees and liquidity.
Access is Not Alignment
Private equity now faces a crossroads. It can broaden access responsibly, building trust with retail investors, or reinforce perceptions that it serves others first. For 401(k) plan sponsors and participants, the prudent course is cautious engagement—welcoming innovation in expansion of access to private markets while maintaining investor protections through disclosure and oversight.
Access, after all, is not alignment. Done thoughtfully, private equity investment in 401(k)s provides broader investment solutions for retirement savers. Done poorly, it risks harming individuals and eroding confidence in the retirement system itself.