May 21, 2025
Trump is reportedly considering an executive order enabling private equity firms to access the nearly $9 trillion US retirement savings market directly, specifically through 401(k) plans.
If enacted, the order would instruct key regulatory agencies—including the Department of Labor, the Treasury, and the Securities and Exchange Commission (SEC)—to explore ways to incorporate private investment funds into retirement plans. This shift could unlock hundreds of billions of dollars in new capital for major private equity players such as Blackstone, KKR, and Apollo Global Management, whose executives have long seen retirement savings as a major growth opportunity.
The idea of allowing private equity investments in retirement plans was first introduced during Trump’s first term, but saw limited adoption due to concerns over legal liability and regulatory uncertainty. Many retirement plan managers hesitated, fearing potential lawsuits if private investments underperformed or faced liquidity issues.
An executive order might, on the surface, strengthen legal protections and remove existing barriers, making it easier for institutional investors to allocate retirement funds to private markets.
Private equity firms have been actively positioning themselves to capitalize on this potential shift:
- Blackstone, Apollo, and KKR have formed strategic partnerships with major asset managers like Vanguard and State Street.
- Empower Retirement, one of the largest 401(k) providers in the US, has agreed to offer funds managed by Apollo, Partners Group, and Goldman Sachs to retirement savers.
Regulators have signaled a growing openness to the idea:
- SEC Chair Paul Atkins has indicated that the commission may reconsider the 15% cap on private assets in registered funds, supposedly seeking a balance between investor protection and expanded access to alternative investments.
From my critical thinking perspective, I have several concerns:
- Valuation opacity: There are serious transparency issues here. Unlike publicly traded assets, private holdings are harder, if not impossible, to value accurately.
- Liquidity risks: Private equity investments are mostly illiquid, making them unsuitable for retirees who may need quick access to funds.
- High fees: Private funds typically charge significantly higher management and performance fees than traditional index funds.
Private equity executives argue that the long-term nature of retirement savings aligns well with private equity’s multi-year investment horizon, potentially offering higher returns than traditional public market options.
My question is, why not just buy Blackstone (BX), Apollo (APO), and KKR (KKR) directly? If the investment was made today, say one-third each, the current dividend yield would be 1.57%, and the 10-year Average Annualized Total Return (AATR) has been a very respectable 21.8%. Using the rule of 72, your untouched retirement capital doubles about every 3 years and 3 months. Even if there are some rough years ahead in the market, and the AATR might double your capital in say seven years, an excellent return. If, instead, you stuck with a trio of Microsoft, Amazon, and Alphabet (Google), the AATR was an average of 24.3%. So, why not stick with something you know and understand?
So, the question is, why provide risk capital to private equity to invest your retirement funds directly in high-cost, illiquid, and opaquely valued assets? I’m not opposed to this because I can see the value for some people, but it doesn’t make sense for almost anybody to do it.
What’s Next?
A final decision on the executive order is still pending. If implemented, it would be a historic moment for private equity, granting the industry access to one of the world’s largest and most stable pools of capital – your retirement funds.