Executive order opens 401(k) accounts to private assets. The 'Halftime' Committee weighs in

Market Trend & Investment Opportunity - President Trump is expected to sign an executive order allowing private and crypto assets into 401(k)s, potentially opening an $8 trillion market to private equity [1][7] - Private equity firms could gain access to a significant portion of the 401(k) market, potentially reaching 5%, or $400 billion [7] Risk Assessment & Concerns - Investing in private markets is significantly more complex than investing in public stock mutual funds, with increased risks related to liquidity and opacity [2][3] - Retail investors may not fully understand the illiquidity of private market assets, which are long-tailed and cannot be easily sold [9][10] - Diversification benefits in private markets may be limited during economic downturns, as private asset valuations may lag behind public market declines [11][12] - There are concerns about high and potentially hidden fees associated with private equity funds in 401(k)s, which could significantly exceed those of traditional index funds (100 basis points vs 3 basis points) [8][13] - The suitability of illiquid private investments for older investors and the challenges of inheriting such assets are questioned, especially regarding access to liquidity when needed [14][15] Alternative Investment Options - Individual investors already have access to alternative investments through platforms connecting asset managers to the RAIA community, albeit typically for larger allocations (e g, $500 thousand) [5] - Investors can gain exposure to private capital and credit through publicly traded vehicles like BDCs (Business Development Companies) such as ARIES and Six Street Lending [6][7] Investor Choice & Considerations - While offering investment choice is generally positive, the complexity and risks of private markets raise concerns about whether individual investors are adequately equipped to make informed decisions [2][4] - The potential for outperforming the S&P 500 through private equity investments in 401(k)s is questioned, with emphasis on the need for diversification and careful allocation (e g, 5%-10% max exposure) [8][9]