The $12 Trillion Question
What Trump’s 401(k) Private Markets Order Really Means
“Democratisation” of Access
On the 7th of August 2025, President Donald J. Trump signed an Executive Order that could redraw the capital markets map. For the first time, US 401(k) retirement plans will be able to invest directly in Private Equity, Venture Capital, Infrastructure, Private Debt, and, which was maybe a key motivator, crypto currencies.
The White House calls it a “democratisation of access.” Supporters say it will unlock growth opportunities for millions of savers. Critics warn it could expose the public to opaque, high-fee strategies better suited to institutions.
As a long-time private markets investor, I am concerned about opening an asset class that even some professionals struggle to navigate to investors with little or no experience. Here I cannot but help quote Warren Buffet:
“We have seen a number of proposals from private equity funds where the returns are really not calculated in a manner that I would regard as honest. If I were running a pension fund, I would be very careful about what was being offered to me.”
Warren Buffet, Chairman Berkshire Hathaway
Private placement rules exist for a reason. ‘Democratisation of access’ sounds appealing, but we do not talk about ‘democratising driving’ by letting three-year-olds behind the wheel – even if they, and the car industry, might think it a great idea.
Nonetheless, as a supporter of the asset class I am for wider access to private markets for private investors and am cautiously optimistic that this will bring more transparency, more scrutiny and potentially higher standards, which would likely benefit all private markets investors.
The move lands at a time when public markets are shrinking in relative importance, private markets are attracting record inflows, and policymakers are looking for ways to channel capital into long-term growth sectors. But it also raises fundamental questions about transparency, valuation, and the responsibilities of fiduciaries overseeing other people’s retirement money. As Ludovic Phalippou notes in a recent paper:
“You cannot have thousands of pages of regulation when individuals buy mutual funds and suddenly a Wild West when it comes to private equity.”
Ludovic Phalippou, Saïd Business School, University of Oxford
I spent part of my weekend reading various sources on this, and in this post try to break down the implications of the executive order, key points to note, and how it might impact GPs and LPs, but first a quick summary.
Source: Balentic Edge, Chat GPT
Summary
- A vast new pool of capital – USD12.4 trillion in defined contribution plans and another USD16.8 trillion in savings accounts is, in principle, now accessible to private markets
- DoL as gatekeeper – The Department of Labor will decide how fiduciary standards, valuation rules, and disclosure requirements are applied in practice
- Big GPs stand to gain – Blackstone, KKR, Apollo, Brookfield, Carlyle, Ares, and Partners Group are positioned to capture early flows
- Risks are structural – NAV inflation, fee opacity, and liquidity mismatches could lead to litigation and reputational damage if unmanaged
- Transparency could improve – The shift might force the industry to adopt higher standards in valuation, governance, and reporting
From Washington to Wall Street: The Political Signal
This Executive Order is as much a political statement as it is a market reform. It says that private markets should no longer be reserved for endowments, sovereign wealth funds, and pensions – that 401(k) participants should have the same access to the growth engines of the economy.
The White House Fact Sheet explicitly frames it as a matter of fairness: allowing “everyday Americans to benefit from the same investment opportunities as institutional investors.
Economically, it aligns with a broader trend: fewer IPOs, more late-stage funding happening privately, and large swathes of economic growth occurring outside public exchanges. If the investable universe for retirement savers is to reflect the real economy, private markets need to be part of it. This order is the policy embodiment of that argument, and in that context not uncompelling at all.
The $12.4 Trillion Prize
The numbers are staggering. US defined contribution plans hold around USD 12.4 trillion in assets. Add USD 16.8 trillion in non-pension savings, and the potential base dwarfs the global private equity market, which sits at roughly USD 13 trillion. Even a cautious 5% allocation from DC plans would equate to over $600 billion – more than the fundraising totals of several large buyout firms combined in recent years.
This influx of new capital is welcome, especially during a period when fundraising is increasingly challenging. However, despite these good intentions, the timing of opening private markets to individual investors – precisely when institutional investors appear to be retreating, reducing allocations, and in some notable instances actively decreasing their exposure – warrants careful consideration.
For private markets managers, this is the retail channel at scale. Unlike the wealth channel / high-net-worth programmes, 401(k) plans offer recurring, payroll-deducted contributions. This creates a stable flow of capital – precisely the kind of funding stream that lends itself to evergreen and semi-liquid structures – the holy grail for many GPs. billion – more than the fundraising totals of several large buyout firms combined in recent years.
The Department of Labor: the New Gatekeepers
While the Executive Order opens the door, the Department of Labor (DoL) becomes the de facto regulator and will decide how wide the door swings. Under ERISA, fiduciary responsibility requires plan sponsors to act “solely in the interest” of participants. That obligation does not vanish with this reform; if anything, it becomes more complex.
The DoL will need to define what “prudent” means in a market where assets are illiquid, valuations are subjective, and fees can be multi-layered. The DoL will likely draw on precedents from its 2020 information letter that allowed limited private equity exposure in target-date funds, but the scale here is far greater.
Analysis from Kirkland & Ellis importantly notes that while the Executive Order clears the path, it does not override fiduciary standards – meaning plan sponsors will still need defensible processes for product selection. They expect the DoL to give guidance on:
- Redemption and liquidity provisions
- Valuation frequency and methodology
- Disclosure of fee layers
- Performance reporting standards
If the DoL gets this right, it can foster innovation without undermining protections, likely to the benefit of all investors. If it gets it wrong, it could set up a costly cycle of mis-selling claims and lawsuits, which would also impact institutional investors
The GP Playbook: Who Wins and Why
The firms that are likely best positioned to benefit are those that already have experience in successfully creating and managing semi-liquid products for the wealth channel and have the expertise and depth and breadth to push further into the retail channel.
Blackstone has been aggressively growing its BREIT and BCRED platforms, both designed for periodic liquidity and broad distribution. KKR has interval funds and evergreen vehicles already in place. Apollo dominates in private credit and can offer yield-focused products appealing to retirement savers. Brookfield and Partners Group bring infrastructure strategies that align naturally with the long-term horizons of pension capital. Carlyle and Ares have diversified platforms that can be adapted into compliant DC offerings.
Aside from these there are the more classic asset managers like BlackRock and Goldman Sachs that not only have the private markets expertise, products and structuring capabilities but more importantly have the distribution capabilities which the more ‘pure play’ private market managers may not have or will need to develop further.
Foralls, the challenge is operational. Monthly or quarterly NAV strikes require robust valuation processes. Redemption requests must be met without impairing the portfolio. Marketing and education materials need to satisfy both regulators and fiduciaries. The reward, however, is access to a market that could rival their institutional channels in size.
Upside:
- Access to a stable, recurring capital base
- Ability to launch larger evergreen or hybrid funds
- Enhanced brand visibility in the retail / retirement market
Downside:
- Increased scrutiny from regulators and media
- Need for daily or monthly NAVs in products designed for illiquid assets
- Operational complexity in managing redemptions and liquidity sleeves
New Products for a New Channel
Not every private markets strategy will make sense for 401(k) plans. Products will need to balance return potential with liquidity management and suitability. Evergreen funds, interval funds, and tender-offer vehicles are the most likely structures. Private credit, with its regular cash flows, is well suited to this audience. Infrastructure debt and core-plus equity could also work, offering income and inflation linkage.
Venture capital and opportunistic real estate, with their high dispersion of returns and longer holding periods, are less likely to be front-runners. But as the market matures, hybrid vehicles blending multiple strategies may emerge.
Expect to see feeder funds into flagship buyout or infrastructure strategies, wrapped in structures that can meet DC operational requirements.
The Transparency Test - the Devil is in the Details
Valuation will be the flashpoint. In closed-end funds, NAV was largely academic until realisations occurred. In semi-liquid structures, NAV is the price – every subscription and redemption depends on it.
As Ludovic Phalippou warns, “If redeeming investors exit at an inflated NAV, they receive more than they should and the remaining investors bear the loss. If the NAV is understated, the existing investors can claim they were shortchanged.”
Secondary market data already shows mismatches between marks and market reality. Venture portfolios marked at 2021 valuations, or office properties carried at pre-pandemic prices, create distortions. For 401(k) investors, who rarely have access to secondary market intelligence, the risk is magnified.
Fees are another area where transparency will be tested. Multi-layered cost structures – management and performance fees at the underlying fund, plus distribution and admin costs at the wrapper level – can materially erode returns. Full disclosure from gross to net is essential if fiduciaries are to make informed decisions.
In both cases this is something that so-called sophisticated investors have a hard time breaking down and fully grasping the implications of.
Why LPs Should Care (and Worry)
Institutional LPs might think this is a retail story, but it has implications for the whole market. If DC allocations grow rapidly, they could alter the fundraising mix, potentially increasing competition for certain strategies and influencing liquidity dynamics.
The reputational risk is also market-wide. If high-profile blow-ups occur in the DC channel – for example, redemption gates in a down market or NAV of fee disputes – the resulting scrutiny will not stop at the products involved. It will spill over into broader private markets regulation and public perception.
In the case of feeder vehicles to flagship funds and strategies it will possibly further directly affect the investments of institutional investors in these same funds and strategies.
On the other hand, for institutional LPs, this is a chance to push for the same transparency and governance in DC products that they expect in institutional mandates. For GPs, it is an opportunity to prove that private markets can meet higher disclosure standards without sacrificing performance.
Institutional LPs need to factor this into their due diligence of GPs that are or might be tapping into the retail channel and their investments may be exposed to retail structures. At a minimum they need to consider:
- How is NAV calculated, and who audits it?
- What are the gating provisions in stress scenarios?
- How are fees layered across fund, feeder, and distribution levels?
The Path to a Sustainable Market
The opportunity is clear, but so is the need for safeguards. Independent valuation oversight, standardised performance metrics, transparent fee reporting, and robust liquidity management are not optional. Education for both plan sponsors and participants will be critical to avoid misaligned expectations.
Handled well, this reform could deepen capital pools, diversify investor bases, and encourage the industry to modernise its practices. Handled poorly, it risks becoming a cautionary tale. The first generation of products launched under this regime will set the tone for everything that follows.
For this opening of access to work, certain safeguards are essential:
- Standardised valuation protocols with third-party oversight
- Liquidity stress-testing and transparent gating policies
- Full fee disclosure from gross to net returns
- Education for plan participants on illiquidity and long-term investing
Plan sponsors should treat manager selection for 401(k) private markets options with the same intensity as larger third party asset managers do: deep investment and operational due diligence, stress testing, and legal reviews.
Trump’s Executive Order has likely thrown open the doors of private markets to a vast new audience. For GPs, it is an unprecedented growth opportunity. For retirement savers, if implemented prudently, it is a chance to access new sources of return. And for the industry as a whole, it is a moment to decide whether “democratisation” means genuine inclusion or just more people for private markets.
This time around, dare I say it…
Stay Illiquid!
Kasper
Sources
- The White House – Democratizing access to alternative assets for 401(K) investors
- The White House – Fact Sheet: President Donald J. Trump Democratizes Access to Alternative Assets for 401(k) Investors
- Kirkland & Ellis – Kirkland Alert
- Ludovic Phalippou – Private Markets for the People? Or Just More People for Private Markets?
- Bloomberg – White House readies order to bring private equity to 401 (K)s
- Morningstar – Is Private Market Investing Coming to Your 401(k)? Here’s What Trump’s Executive Order Could Mean for Investors
- Forbes – Private Equity Firms Celebrate Trump’s Executive Order Giving Them The Keys To Retirement
- The New York Times – Private Equity in Your 401(k). What Could Go Wrong?
Disclaimer: For informational purposes only. Not an offer, solicitation, or recommendation to buy or sell any security or strategy. Not for retail or the general public. Views are personal and do not reflect any affiliated entity. Orca is not a placement agent and does not offer securities to the public. Access to strategy information is restricted to verified institutional investors under applicable laws (e.g. Reg D, AIFMD, UK COBS 4).
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