US paves way for private assets to be included in 401(k) retirement plans

The Trump administration on Monday issued a long-awaited proposed rule to open up retirement plans to alternative assets, paving the way for private equity and cryptocurrencies to be added to 401(k) accounts. The measure, announced by the U.S. Department of Labor, is intended to ease longstanding barriers to incorporating these less liquid and less transparent assets into American retirement plans. It follows an executive order from President Donald Trump last summer and could clear the way for alternative asset management firms to tap a large new source of capital.

Industry groups have argued private market investments can enhance long-term returns and diversification for retirement savers, while skeptics warn higher fees, complexity and limited liquidity could limit those gains and pose risks for retail investors. Some private market funds that are already available to wealthier individual investors have shown signs of strain in recent months. Private credit funds known as business development companies have seen a wave of withdrawals.

Treasury Secretary Scott Bessent said the proposed rule was "an initial step" and aimed to be "mindful of the importance of protecting retirement assets."

The guidance lays out how plan trustees, who have a legal fiduciary duty to act in the best interest of members, can incorporate these assets.

They would have to "objectively, thoroughly, and analytically consider, and make determinations on factors including performance, fees, liquidity, valuation, performance benchmarks, and complexity," the DOL said.

Trustees who abide by them will be granted safe harbor that protects them from lawsuits, it added. The Supreme Court agreed earlier this year to hear one such case filed in 2019 by a former Intel employee claiming trustees made "imprudent" decisions by investing in hedge funds and private equity funds.

A Labor Department official said the rule was not telling providers how to invest and was not shaped by market moves.

"We're giving them the toolkit so that they can follow an analytical, thorough and objective process," the official said.

Alternative asset managers such as Blackstone, KKR, and Apollo Global Management could benefit from the chance to draw on the new pool of capital. Their shares gained following the announcement.

The world's largest asset manager, BlackRock, which counts more than half its $14 trillion in assets under management as linked to retirement, is among many industry members and groups to applaud the move.

"The President's Executive Order is a thoughtful step toward addressing the growing retirement crisis," said Apollo CEO Marc Rowan.