Alternative Asset Options Will Boost 401(K) Portfolios 

On August 7^th, 2025, President Trump signed an executive order directing the Department of Labor (DoL) to issue guidance permitting fiduciary offerings of alternative assets, such as private equity, for defined contribution participants. Expanding investment choices for investors will enhance portfolio returns and provide individuals with more diversified retirement portfolios.  

The order directs the DoL to clarify the agency’s stance on fiduciary responsibilities associated with offering fund options including alternative assets. The primary aim is to provide clarity for fiduciaries to begin offering alternative asset exposure without risking potential litigation. For decades, 401(k) fiduciaries have been subject to prudent expert standards under the Employee Retirement Income Security Act (ERISA). While ERISA intends to optimize returns, liquidity, and manage risk, risk-averse interpretations of ERISA by federal agencies have deterred fiduciaries from venturing into alternative assets.  

Defined benefit plans, such as public pensions, already invest in alternative assets such as private funds and private equity. Institutional investors highlight private equity as their best-performing asset class on a consistent basis. The aptly titled executive order will indeed democratize access to alternative assets by helping extend the asset class’ exposure beyond employees in the public-sector. Over 90 million Americans, many of whom are in the private sector, are set to benefit from this shift in government policy.  

While skeptics caution against private equity’s higher fees and illiquidity, these investments naturally reward investors willing to overlook the inconveniences. Studies show that private equity delivers greater returns than developed equity markets. 

President Trump’s reform should also be embraced as a welcome change that mirrors the changing nature of U.S. capital markets. The number of publicly traded U.S. companies has halved from its peak in 1996. Private equity assets, however, have more than doubled since 2013. Diversification is a core tenet of ERISA fiduciary duties, and as investment options in public markets have dwindled, allowing investors to recoup that lost market exposure through alternative assets will help advance that goal with even higher return potential.  

Before being overturned in 2021 under the Biden administration, the DoL released guidance in 2020 indicating fiduciaries would not be in violation of their responsibilities if they prudently vetted alternative asset offerings for plan participants. The new order expands those efforts by directing the DoL to identify the criteria necessary for fiduciaries to prudently select alternative asset offerings. Guidance could also include safe harbors that would shield fiduciaries from frivolous litigation, provided they follow an ERISA-compliant framework set out by the DoL.  

Ideally, the DoL should initiate a formal rulemaking process to secure the policy move and protect any attempt to overturn it as was the case with the Biden administration. Informal guidance is a starting point, but not a sufficient end. The rulemaking process would also allow the department to collect feedback from stakeholders and tailor the rule to better serve the needs of fiduciaries and plan participants.  

President Trump’s executive order should be celebrated as a win for defined contribution plan participants saving for retirement. Employees participating in 401(k) plans can increase their returns, diversify their portfolios, and enjoy parity with public-sector pensions in their access to alternative asset classes. Encouraging agency guidance in a manner that explicitly preempts wasteful ERISA litigation will ensure that implementation is not stymied by drawn-out court battles. The new order will unleash the power of private markets for everyday Americans, not just a select few.