Trump Signs Executive Order Allowing Private Equity and Crypto Into 401(k)s — Barrons.com
By Joe LightPresident Donald Trump on Thursday signed an executive order opening up Americans' 401(k) plans to private-equity funds, cryptocurrencies such as Bitcoin, and other so-called alternative investments. It is a major win for investment managers and digital-assets companies.The order directs the U.S. Department of Labor, which oversees 401(k) rules, to reexamine its guidance on employers' fiduciary duties for the plans, according to a White House official. It also tells the Securities and Exchange Commission to ease access to alternative assets by revising its own rules and guidance.The price of Bitcoin over the past 24 hours rose about 1.4% to $117,000. Ether rose 4.7% to $3,850, while smaller cryptocurrencies like XRP, Dogecoin, and Cardano each rose more than 2%.The order unlocks a massive opportunity for PE funds and crypto investments. According to the Investment Company Institute, 401(k)s held $8.9 trillion in assets as of September last year. Private-equity firms for years have sought to offer their funds in the plans, and until this year, the Labor Department had outright discouraged plan sponsors from including crypto as an investment option.The White House official said alternative assets offer competitive returns and diversification benefits and will improve Americans' retirement prospects.Few 401(k) plans offer PE or crypto investments directly. Plan sponsors, which are typically employers, have a fiduciary responsibility to plan participants to select appropriate investments and are sometimes sued by employees for allegedly breaching that duty.Alternative investments often are more volatile than typical funds, carry higher fees, and sometimes have a higher risk that investors won't be able to sell quickly when they need to. The guidance and threat of lawsuits have made most companies hesitant to include such investments in their 401(k) plan options.In March 2022, during President Joe Biden's administration, the Labor Department put out guidance telling plan sponsors to take "extreme care" in offering crypto investments in their plans. Crypto trade associations said that was an unfair standard not present for other kinds of investments.Though plan administrators including Fidelity Investments during the Biden administration began to offer companies the choice to include Bitcoin-tied investments in their plans, the Labor Department guidance effectively dissuaded many sponsors from including crypto.The Trump administration in May dropped that guidance, and Thursday's executive order looks to make it even easier for sponsors to add crypto and PE investment options to their plans.Savers looking immediately to allocate portions of their retirement funds to crypto or private equity may have to wait. It is likely to take years for plan sponsors to gain the ultimate legal certainty they want and then to change their offerings.Write to Joe Light at [email protected] content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.