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Executive Order Encourages Inclusion of Private Markets Investments in US Retirement Plans

  • Market commentary

August 7, 2025 | 5 min read

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President Trump today signed “Democratizing Access to Alternative Assets for 401(k) Investors,” an Executive Order (EO) aimed at reducing legal uncertainty around the inclusion of alternative assets, including investments in private markets, cryptocurrency, and real estate, in US defined contribution (DC) retirement plans.

Pension and social security funds around the world, acting as institutional investors on behalf of their stakeholders, have been allocating to private markets for decades and benefiting from their potential for improved diversification and investment performance. Now, defined contribution sponsors and their participants have a clearer path toward achieving the same benefits of private markets investing through their own plans.

With public markets shrinking, private markets exposure is necessary to rebalance core holdings. By providing this EO, we believe the Trump administration has made it clear that addressing the regulatory ambiguity in this area is a priority. Here are some key questions and answers for private market investors interested in following the process:

What is the current policy around private investments in DC plans?

While US defined benefit (DB) plans have long included private investments due to their potential for higher long-term returns and diversification benefits, DC plans have historically only allowed plan participants access to public market investments. However, in June 2020, under the first Trump administration, the DOL released an “Information Letter” to confirm that “investment options under a defined contribution plan…may include a limited allocation to private equity.”1

A follow-up statement from the DOL emphasized several key fiduciary considerations and established that the original guidance was intended for large plan fiduciaries with experience in private investments because they also manage DB plans.2 This guidance was later affirmed by the DOL under President Biden. However, important questions remain outstanding on the specifics of what is permitted under the guidance, including:

  • What constitutes “appropriate due diligence” for private investments?
  • Will the DOL consider providing a safe harbor for fiduciaries, which could significantly reduce perceived litigation risk?
  • How should fiduciaries handle disclosure and participant communications?
  • What level of liquidity must be maintained for daily trading?
  • What types of structures are acceptable under ERISA?
  • How can private investments meet ERISA’s “reasonable fee” requirement and transparency expectations?
  • Is there a set asset or participant level that distinguishes a smaller plan from a large plan?

As the idea of explicitly allowing DC plan administrators to participate in the opportunities of private markets has become more and more mainstream, plan administrators have historically been weary of exploring the options due to the lack of legal clarity. Today’s EO should alleviate some of that concern.

Why are policymakers interested in changing this policy?

The opportunity set in public markets continues to shrink, with the number of US publicly traded companies peaking at 7,300 in 1996 and now hovering around 4,300. Meanwhile, the number of private companies backed by PE firms has jumped from 1,900 to 11,000.3 In addition, the growth opportunities available to public market investors has become more limited as firms stay private for longer and arrive on the IPO market larger and more mature. The result is a public market that has become extremely concentrated, with just a handful of stocks driving performance. Partially in response to these market dynamics, DB plans have already embraced private market assets. Between 2001 and 2016, the share of pension plans invested in alternatives rose from 9% to 29%.4 DC plans, however, have been hampered by the regulatory uncertainty involved with their unique legal obligations, including the fiduciary responsibility to operate in the best interest of plan participants. While the DOL has put out several pieces of guidance meant to clarify the issue, there has not previously been an explicit push from the White House to look more holistically at the matter and ensure the full regulatory framework is clear for plan administrators.

What happens next in the process?

The EO importantly lays out a deliberative process by which its changes can be implemented. Specifically, it directs the Secretary of Labor to:

  1. Within 180 days, review the Department of Labor’s (DOL) fiduciary guidance on alternative asset investments in DC plans that are governed by the Employee Retirement Income Security Act of 1974 (ERISA).
  2. Within 180 days, clarify the DOL’s position on alternative assets and the appropriate fiduciary process associated with offering funds containing alternative asset investments.
  3. Consult with regulatory counterparts at the Treasury Department, SEC, and others to determine whether rule changes should be made to assist in the effort.

Further, the SEC is directed to facilitate access to alternative assets by revising applicable regulations and guidance.

When the DOL (or SEC) is directed to reevaluate guidance, it generally follows a multi-step administrative process involving internal review, stakeholder engagement, and potential rulemaking. First, key DOL divisions such as the Employee Benefits Security Administration (EBSA) will review existing guidance, relevant statutory and regulatory authority, court precedents, and economic literature.

The DOL will often hold public listening sessions or roundtables at which stakeholders representing a broad spectrum of interests will be invited to share their opinions on the merits of the rule when significant changes such as these are being contemplated. DOL staff will also likely hold private meetings with industry leaders, labor groups, consumer advocates, and academics. For example, the DOL held multiple public hearings and roundtables during the original development of the fiduciary rule. In some cases, the DOL may issue a Request for Information (RFI) to gather data before proposing new rules or guidance.

If the DOL, the SEC, or other regulators determine that reevaluation warrants a change to their regulatory framework, it would initiate the formal rulemaking process governed by the Administrative Procedure Act (APA). The process is as follows:

  1. Notice of Proposed Rulemaking (NPRM) is published in the Federal Register
  2. Public comment period
  3. Review and analysis of comments
  4. Final Rule is issued, with an effective date and transition guidance

How long might this process take?

The timeline for completing a full re-evaluation can take anywhere from 6 months to several years. Beyond the 180-day time frames stipulated by the EO, it is difficult to put an exact timeline on the rest of the process.

Any major policy change would potentially be in danger of reversal should the next administration have a different perspective on these issues. As such, regulators will typically aim to get these in place during the first half of the administration. Under the Congressional Review Act, Congress has 60 legislative days (not calendar days) to introduce and pass a “joint resolution of disapproval.”

If the resolution passes both houses of Congress (which would likely not happen unless both were under Democratic control) it goes to the President for his signature or veto. Obviously, if President Trump or a similarly aligned individual is in that position at the time, they are likely to veto. Thus, this scenario usually only plays out when there is a full transfer of power (House of Representatives, Senate, and presidency) from one party to another following a Presidential election.

What guardrails might be put into place during this process?

During this process, important guardrails will likely be set in order to insulate everyday retirement savers from some of the risks inherent to private investing. This order does not signal unrestricted access for all retail investors to enter private markets. While all investments carry some level of risk, the administration is seeking to responsibly open up the opportunity in the robust private markets while maintaining a level of security for the everyday 401(k) or 403(b) plan participant.

The SEC Chairman recently said that he would work with the Department of Labor to develop “good guardrails” around this access. The SEC has mentioned requiring investors to work with a fiduciary to put private markets products into their long-term savings and retirement plans. Other guardrails could come in the form of specific requirements for funds that are offered to these plans, such as a threshold level of diversification.

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Key takeaways

This is a critical moment for US retirement plans, comparable to the QDIA regulations enacted nearly 20 years ago that transformed retirement accounts by introducing target date funds and expanded access to diversified, professionally managed portfolios.

Private markets, with their long-term focus, innovation, and historical ability to outperform public market returns are particularly suited for retirement plans. Providing more plan participants access to these benefits could revolutionize the retirement industry and improve outcomes for millions of Americans.

While the details are still to be finalized, HarbourVest aims to contribute to this process by sharing our perspective and leveraging over 40 years of experience in diversified, multi-manager strategies at scale. We look forward to sharing our insights on this and other issues of importance for our clients as they develop.

Footnotes
    1. https://www.erisapracticecenter.com/2020/06/dol-information-letter-outlines-fiduciary-considerations-for-including-private-equity-allocations-in-defined-contribution-plan-investments/
    2. https://www.erisapracticecenter.com/2020/06/dol-information-letter-outlines-fiduciary-considerations-for-including-private-equity-allocations-in-defined-contribution-plan-investments/
    3. Chairman and CEO Letter to Shareholders, JPMorganChase (April, 2024)  
    4. Examining Private Equity in Public Pension Investments, Reason Foundation (January, 2021)
Disclosure

Diversification does not ensure a profit or protect against a loss.

HarbourVest Partners, LLC (“HarbourVest”) is a registered investment adviser under the Investment Advisers Act of 1940. This material is solely for informational purposes; the information should not be viewed as a current or past recommendation or an offer to sell or the solicitation to buy securities or adopt any investment strategy. In addition, the information contained in this document (i) may not be relied upon by any current or prospective investor and (ii) has not been prepared for marketing purposes. In all cases, interested parties should conduct their own investigation and analysis of the any information set forth herein and consult with their own advisors. HarbourVest has not acted in any investment advisory, brokerage or similar capacity by virtue of supplying this information. The opinions expressed herein represent the current, good faith views of the author(s) at the time of publication, are not definitive investment advice, and should not be relied upon as such. This material has been developed internally and/or obtained from sources believed to be reliable; however, HarbourVest does not guarantee the accuracy, adequacy or completeness of such information. The information is subject to change without notice and HarbourVest has no obligation to update you. There is no assurance that any events or projections will occur, and outcomes may be significantly different than the opinions shown here. This information, including any projections concerning financial market performance, is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. The information contained herein must be kept strictly confidential and may not be reproduced or redistributed in any format without the express written approval of HarbourVest.

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Professional Investor Definition

“Professional Investor” under the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) and its subsidiary legislation) means:

(a) any recognised exchange company, recognised clearing house, recognised exchange controller or recognised investor compensation company, or any person authorised to provide automated trading services under section 95(2) of the SFO;

(b) any intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong;

(c) any authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong;

(d) any insurer authorized under the Insurance Ordinance (Cap. 41 of the Laws of Hong Kong), or any other person carrying on insurance business and regulated under the law of any place outside Hong Kong;

(e) any scheme which-

(i) is a collective investment scheme authorised under section 104 of the SFO; or

(ii) is similarly constituted under the law of any place outside Hong Kong and, if it is regulated under the law of such place, is permitted to be operated under the law of such place,

or any person by whom any such scheme is operated;

(f) any registered scheme as defined in section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap. 485 of the Laws of Hong Kong), or its constituent fund as defined in section 2 of the Mandatory Provident Fund Schemes (General) Regulation (Cap. 485A of the Laws of Hong Kong), or any person who, in relation to any such registered scheme, is an approved trustee or service provider as defined in section 2(1) of that Ordinance or who is an investment manager of any such registered scheme or constituent fund;

(g) any scheme which-

(i) is a registered scheme as defined in section 2(1) of the Occupational Retirement Schemes Ordinance (Cap. 426 of the Laws of Hong Kong); or

(ii) is an offshore scheme as defined in section 2(1) of that Ordinance and, if it is regulated under the law of the place in which it is domiciled, is permitted to be operated under the law of such place,

or any person who, in relation to any such scheme, is an administrator as defined in section 2(1) of that Ordinance;

(h) any government (other than a municipal government authority), any institution which performs the functions of a central bank, or any multilateral agency;

(i) except for the purposes of Schedule 5 to the SFO, any corporation which is-

(i) a wholly owned subsidiary of-

(A) an intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong; or

(B) an authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong;

(ii) a holding company which holds all the issued share capital of-

(A) an intermediary, or any other person carrying on the business of the provision of investment services and regulated under the law of any place outside Hong Kong; or

(B) an authorized financial institution, or any bank which is not an authorised financial institution but is regulated under the law of any place outside Hong Kong; or

(iii) any other wholly owned subsidiary of a holding company referred to in subparagraph (ii); or

(j) any person of a class which is prescribed by rules made under section 397 of the SFO for the purposes of this paragraph as within the meaning of this definition for the purposes of the provisions of the SFO, or to the extent that it is prescribed by rules so made as within the meaning of this definition for the purposes of any provision of the SFO.

The first of such classes of additional “professional investor”, under the Securities and Futures (Professional Investor) Rules (Cap. 571D of the Laws of Hong Kong), are:

(k) any trust corporation (registered under Part VIII of the Trustee Ordinance (Cap. 29 of the Laws of Hong Kong) or the equivalent overseas) having been entrusted under the trust or trusts of which it acts as a trustee with total assets of not less than HK$40 million or its equivalent in any foreign currency at the relevant date (see below) or-

(i) as stated in the most recent audited financial statement prepared-

(A) in respect of the trust corporation; and

(B) within 16 months before the relevant date;

(ii) as ascertained by referring to one or more audited financial statements, each being the most recent audited financial statement, prepared-

(A) in respect of the trust or any of the trust; and

(B) within 16 months before the relevant date; or

(iii) as ascertained by referring to one or more custodian (see below) statements issued to the trust corporation-

(A) in respect of the trust or any of the trusts; and

(B) within 12 months before the relevant date;

(l) any individual, either alone or with any of his associates (the spouse or any child) on a joint account, having a portfolio (see below) of not less than HK$8 million or its equivalent in any foreign currency at the relevant date or-

(i) as stated in a certificate issued by an auditor or a certified public accountant of the individual within 12 months before the relevant date; or

(ii)  as ascertained by referring to one or more custodian statements issued to the individual (either alone or with the associate) within 12 months before the relevant date;

(m) any corporation or partnership having-

(i) a portfolio of not less than HK$8 million or its equivalent in any foreign currency; or

(ii) total assets of not less than HK$40 million or its equivalent in any foreign currency, at the relevant date, or as ascertained by referring to-

(iii) the most recent audited financial statement prepared-

(A) in respect of the corporation or partnership (as the case may be); and

(B) within 16 months before the relevant date; or

(iv) one or more custodian statements issued to the corporation or partnership (as the case may be) within 12 months before the relevant date; and

(n) any corporation the sole business of which is to hold investments and which at the relevant date is wholly owned by any one or more of the following persons-

(i) a trust corporation that falls within the description in paragraph (k);

(ii) an individual who, either alone or with any of his or her associates on a joint account, falls within the description in paragraph (k);

(iii) a corporation that falls within the description in paragraph (m);

(iv) a partnership that falls within the description in paragraph (m).

For the purposes of paragraphs (k) to (n) above:

  • “relevant date” means the date on which the advertisement, invitation or document (made in respect of securities or structured products or interests in any collective investment scheme, which is intended to be disposed of only to professional investors), is issued, or possessed for the purposes of issue;
  • “custodian” means (i) a corporation whose principal business is to act as a securities custodian, or (ii) an authorised financial institution under the Banking Ordinance (Cap. 155 of the Laws of Hong Kong); an overseas bank; a corporation licensed under the SFO; or an overseas financial intermediary, whose business includes acting as a custodian; and
  • “portfolio” means a portfolio comprising any of the following (i) securities; (ii) certificates of deposit issued by an authorised financial institution under the Banking Ordinance (Cap, 155 of the Laws of Hong Kong) or an overseas bank; and (iii) except for trust corporations, cash held by a custodian.

Institutional Investor / Accredited Investor Definition

An institutional investor as defined in Section 4A of the SFA and Securities and Futures (Classes of Investors) Regulations 2018 is:

(a) the Singapore Government;

(b) a statutory board as may be prescribed by regulations made under section 341 of the SFA, as prescribed in the Second Schedule of the Securities and Futures (Classes of Investors) Regulations 2018;

(c) an entity that is wholly and beneficially owned, whether directly or indirectly, by a central government of a country and whose principal activity is —

(i) to manage its own funds;

(ii) to manage the funds of the central government of that country (which may include the reserves of that central government and any pension or provident fund of that country); or

(iii) to manage the funds (which may include the reserves of that central government and any pension or provident fund of that country) of another entity that is wholly and beneficially owned, whether directly or indirectly, by the central government of that country;

(d) any entity —

(i) that is wholly and beneficially owned, whether directly or indirectly, by the central government of a country; and

(ii) whose funds are managed by an entity mentioned in sub‑paragraph (c);

(e) a bank that is licensed under the Banking Act 1970;

(f) a merchant bank that is licensed under the Banking Act 1970;

(g) a finance company that is licensed under the Finance Companies Act 1967;

(h) a company or co‑operative society that is licensed under the Insurance Act 1966 to carry on insurance business in Singapore;

(i) a company licensed under the Trust Companies Act 2005;

(j) a holder of a capital markets services licence;

(k) an approved exchange;

(l) a recognised market operator;

(m) an approved clearing house;

(n) a recognised clearing house;

(o) a licensed trade repository;

(p) a licensed foreign trade repository;

(q) an approved holding company;

(r) a Depository as defined in section 81SF of the SFA;

(s) a pension fund, or collective investment scheme, whether constituted in Singapore or elsewhere;

(t) a person (other than an individual) who carries on the business of dealing in bonds with accredited investors or expert investors;

(u) a designated market‑maker as defined in paragraph 1 of the Second Schedule to the Securities and Futures (Licensing and Conduct of Business) Regulations;

(v) a headquarters company or Finance and Treasury Centre which carries on a class of business involving fund management, where such business has been approved as a qualifying service in relation to that headquarters company or Finance and Treasury Centre under section 43D(2)(a) or 43E(2)(a) of the Income Tax Act 1947;

(w) a person who undertakes fund management activity (whether in Singapore or elsewhere) on behalf of not more than 30 qualified investors;

(x) a Service Company (as defined in regulation 2 of the Insurance (Lloyd’s Asia Scheme) Regulations) which carries on business as an agent of a member of Lloyd’s;

(y) a corporation the entire share capital of which is owned by an institutional investor or by persons all of whom are institutional investors;

(z) a partnership (other than a limited liability partnership within the meaning of the Limited Liability Partnerships Act 2005) in which each partner is an institutional investor.

An accredited investor as defined in Section 4A of the SFA and Securities and Futures (Classes of Investors) Regulations 2018 is:

(i)  an individual —

(A) whose net personal assets exceed in value $2 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount;

(B) whose financial assets (net of any related liabilities) exceed in value $1 million (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount, where “financial asset” means —

(BA) a deposit as defined in section 4B of the Banking Act 1970;

(BB) an investment product as defined in section 2(1) of the Financial Advisers Act 2001; or

(BC) any other asset as may be prescribed by regulations made under section 341; or

(C) whose income in the preceding 12 months is not less than $300,000 (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe in place of the first amount;

(ii)  a corporation with net assets exceeding $10 million in value (or its equivalent in a foreign currency) or such other amount as the Authority may prescribe, in place of the first amount, as determined by —

(A) the most recent audited balance sheet of the corporation; or

(B) where the corporation is not required to prepare audited accounts regularly, a balance sheet of the corporation certified by the corporation as giving a true and fair view of the state of affairs of the corporation as of the date of the balance sheet, which date must be within the preceding 12 months;

(iii) A trustee of a trust which all the beneficiaries are accredited investors; or

(iv) A trustee of a trust which the subject matter exceeds S$10 million; or

(v) An entity (other than a corporation) with net assets exceeding S$10 million (or its equivalent in a foreign currency) in value. “Entity” includes an unincorporated association, a partnership and the government of any state, but does not include a trust; or

(vi) A partnership (other than a limited liability partnership) in which every partner is an accredited investor; or

(vii) A corporation which the entire share capital is owned by one or more persons, all of whom are accredited investors.

Continuation solutions encompass a host of transaction types in which a GP secures interim liquidity and/or additional primary capital for their LPs in a strongly performing asset, or set of assets, that the GP will continue to own and control. Specifically, they include continuation funds, new funds created by GPs for the purpose of acquiring the asset(s) that continue to be managed by the same GP and capitalized by one or several secondary buyers, or equity recapitalizations involving a direct equity or structured equity investment into a portfolio company. These transactions can also include a parallel investment from the GP’s latest fund into that same pool of assets (a “cross-fund trade”).