401(k) Expansion Under Trump: A New Era for Alternative Assets

The U.S. retirement savings landscape is undergoing a seismic shift. For decades, alternative assets like private equity, infrastructure, and commodities—long the domain of institutional investors and high-net-worth individuals—have been locked out of mainstream 401(k) portfolios due to regulatory barriers and fiduciary concerns. But a confluence of policy changes under the Trump administration, culminating in the August 2025 Executive Order on “Democratizing Access to Alternative Assets for 401(k) Plans,” is poised to upend this status quo. This move not only redefines retirement investing but also signals a broader transformation in how Americans approach long-term wealth accumulation.

The Regulatory Evolution: From Caution to Clarity

The journey began in 2020, when the Department of Labor (DOL) issued an Information Letter affirming that private equity could be included in professionally managed, diversified funds within 401(k) plans, provided fiduciaries followed a prudent process. This guidance was a green light for plan sponsors to explore alternatives, but the Biden administration's 2021 Supplemental Statement introduced a chilling caution, emphasizing the risks of illiquidity, complexity, and higher fees. By 2025, the Trump administration's Executive Order reversed this hesitancy, explicitly endorsing the inclusion of alternative assets and directing the DOL and SEC to eliminate regulatory roadblocks.

The implications are profound. For the first time, 401(k) participants—many of whom have historically been limited to index funds and ETFs—now have a viable path to access the same high-return, long-term strategies that have fueled institutional portfolios. This shift is not merely about diversification; it's about redefining the very architecture of retirement savings.

Market Response: Innovation in Illiquid Markets

The regulatory clarity has already spurred innovation. Asset managers and plan sponsors are developing new structures to bridge the gap between illiquid alternatives and the daily liquidity demands of 401(k) participants. Collective investment trusts (CITs), for instance, are being used to package private equity and infrastructure investments into funds that offer periodic liquidity and transparent valuation models. State Street's “Target Retirement IndexPlus Strategy,” which allocates 10% to private markets, is a prime example of how institutional-grade strategies are being adapted for the mass market.

Meanwhile, the 2025 court ruling in Anderson v. Intel Corp. Investment Policy Comm. has further legitimized the inclusion of private funds in 401(k) plans. The court's decision emphasized that fiduciaries are not required to mimic industry norms and that alternative assets are not inherently imprudent if properly vetted. This legal precedent, combined with the DOL's renewed guidance, is reducing litigation risk and encouraging broader adoption.

Asset Class Breakdown: Opportunities and Challenges

Private Equity: Historically, private equity has delivered higher returns than public markets, but its illiquidity and high fees have made it a poor fit for 401(k) plans. The 2025 Executive Order addresses these concerns by directing the DOL to develop safe harbors for fiduciaries and streamline valuation processes. For example, interval funds and tender offer funds are now being structured to provide liquidity while maintaining exposure to private equity.

Infrastructure: Infrastructure investments, with their stable cash flows and inflation-hedging properties, are gaining traction. The DOL's broad definition of “alternative assets” in the 2025 EO explicitly includes infrastructure, paving the way for retirement plans to allocate to projects like renewable energy and transportation. This could unlock trillions in capital for critical U.S. infrastructure needs while offering retirees a steady income stream.

Commodities: The inclusion of commodities in 401(k) plans has been limited by volatility and valuation challenges. However, the DOL's 2025 rescission of its 2022 guidance on cryptocurrencies—returning to a “facts and circumstances” standard—has opened the door for structured commodity investments. Actively managed funds that diversify across metals, energy, and agriculture are now being marketed to retirement plans, offering a hedge against inflation and macroeconomic shocks.

Democratizing Access: A New Paradigm for Retirement Savings

The expansion of alternative assets into 401(k) portfolios is more than a regulatory tweak—it's a democratization of access to wealth-building tools. For years, institutional investors have leveraged private equity and infrastructure to outperform public markets. Now, individual savers can participate in these strategies, albeit with careful structuring to mitigate risks.

This shift also reshapes asset allocation strategies. Traditional 60/40 portfolios are giving way to multi-asset frameworks that include a 10–20% allocation to alternatives. The Urban Institute's modeling suggests that even small allocations to private equity can significantly boost retirement account balances over time. For example, a 1% annual return boost from alternatives could add $50,000 to a $1 million portfolio over 30 years.

The Road Ahead: Risks and Rewards

While the opportunities are clear, challenges remain. Illiquidity, valuation complexity, and fee structures must be carefully managed. For instance, private equity's typical 2% management fee and 20% performance fee could erode returns if not justified by alpha generation. Similarly, infrastructure projects require long-term commitments, which may conflict with the liquidity needs of retirees.

Investors should also consider the regulatory environment. The DOL's 2025 EO is a strong signal, but future administrations could revisit these policies. Diversification and due diligence are key. Investors should prioritize funds with transparent fee structures, robust liquidity mechanisms, and a track record of managing alternative assets in retirement contexts.

Conclusion: A Transformative Moment

The 2025 Executive Order marks a transformative moment in retirement investing. By expanding access to alternative assets, it empowers individual savers to participate in strategies that have long been reserved for institutions. While the road ahead is not without risks, the potential for enhanced returns, diversification, and inflation protection is compelling. For investors, the message is clear: the future of retirement savings is no longer confined to public markets. The age of alternative assets in 401(k) portfolios has arrived.