Yves here. Private equity has been trying for many years to get their products sold to retail investors. Trump has greatly lowered the bar with his executive order.
However (and I do not want to sound like a Pollyanna) but if the private equity part was as easy as a Presidential stroke of a pen, it would have happened already. Selling a financial product to retail investors requires considerably more financial reporting and compliance. That involves another layer of fees and costs when private equity is already pulling out so much in fees and costs as to make private equity less attractive on a risk-return basis than stocks.
That is not to say that the new SEC chair won’t try to bend the rules. See our May post: New SEC Chief on Board with Letting Retail Chumps Invest in Private Equity Even as Pros Like Kuwait Sovereign Wealth Fund Sound Red Alert
But see some of our many posts on private equity’s overstated performance, and the fact that many investors are finally waking up:
Billionaire Blasts Private Equity’s Continued Grifting as Performance Falls Further
Private Equity Seeks to Foist Companies It Can’t Sell on Employees
And that’s before getting to how private equity rentierism is destructive to the public. There is plenty where this came from:
Private Equity on Campus: Why College Students Are Sleeping in Cars
Buy and Bust: Collapse of Private Equity-Backed Rural Hospitals Mired Employees in Medical Bills
But it seems inevitable that retail retirement assets will become the last chumps for both PE and crypto. The only question is to what degree.
By Jake Johnson, staff writer for Common Dreams. Originally published at Common Dreams
U.S. President Donald Trump is expected to sign an executive order on Thursday that would allow private equity and cryptocurrencies into Americans’ 401(k)s, appeasing corporate interests that lobbied for the change and disregarding warnings about the risks it poses to retirement accounts.
Citing an unnamed senior White House official, CNN reported that “the order calls for the Labor Department and Securities and Exchange Commission to issue guidance to employers about providing access to those alternative investments in their retirement accounts.”
The private equity industry has been working for years to gain access to a portion of the roughly $12 trillion that Americans have saved in workplace retirement plans.
“This is the holy grail for private equity,” Axios reported Thursday, noting that federal rules currently bar most defined-contribution plans from investing in private equity and crypto. Both industries spent big on the 2024 election; the investment management behemoth BlackRock, whose CEO has advocated opening 401(k)s to private equity, donated to Trump’s inaugural committee.
James Baratta and Whitney Curry Wimbish noted in The American Prospect earlier this year that “there was added desperation from the industry” for access to 401(k)s “because of their dire need for cash amid weakening performance and fewer deals.”
“Some firms have begun mortgaging their own funds for money to pay out limited partners,” they added. “Retail investors represented trillions in untapped potential.”
Helaine Olen, managing editor at the American Economic Liberties Project and a longtime personal finance columnist, said in a statement Thursday that “stuffing private equity, crypto, and other ‘alternative assets’ into 401(k)s is about propping up scams and bailing out an industry that’s run out of buyers—and it’s being done at the expense of Americans’ retirements everywhere.”
“There’s a reason most employers didn’t bite when Trump tried this the first time and why the private investments industry has put on such a thick lobbying campaign,” said Olen. “These funds are high-fee, risky, and opaque. Private equity consistently underperforms the S&P 500. This is a windfall for billionaire fund managers and a disaster in the making for regular Americans trying to save for retirement.”
Last week, the Americans for Financial Reform Education Fund and American Federation of Teachers released a report warning that if private equity is given a foothold in 401(k)s, “millions of workers saving for retirement would be exposed to higher risks and steep fees in products that lack basic investor protections and transparency requirements.”
The report found that private equity profitability “has been in a year-over-year decline” for the past two decades and that “fee structures—paid directly by investors or indirectly through portfolio companies—are prone to extensive manipulation.”
Lisa Donner, co-executive director at Americans for Financial Reform Education Fund, said that “private equity executives have enriched themselves by the billions, taking high fees and other charges from working people’s hard-earned retirement savings in pension funds.”
“Now they want fees from the trillions of dollars in individual retirement accounts,” Donner added, “putting millions of more people at risk.”
Perhaps the US economy is replicating what happens to snakes under stress?
I think it is inevitable, but how to protect ourselves, other than the old fashioned hard work of reading the prospectus and calling the 1-800 line to harangue the advisors?
My biggest nightmare is that this crap ends up in target date funds. The sheep will be sheared.
What if the 800 line is staffed overseas or even worse, supplemented with a Q&A guided response built on the best AI offerings? Hey dear consumer, please invest your life savings and hold it with “diamond hands!”. \sarc
Employers just found a use case for hiring young whippersnapper lawyers fresh from law school. Write some safe harbor language that puts a wide legal moat as possible, and include in all our detailed retirement planning disclosures. Employers all shifted away from defined benefit pensions and that was no accident, unfortunately for mine, ours and future generations.
It will be … I had to move my entire IRA holdings, save a few shekels out of Vanguard, for this very reason.
The phone customer service deteriorated to the point where it took hours to get through to an overseas call center, none of whom had any authority to do much other than tell me balance info.
Welcome to the Motel Crypto Hell … you can check in anytime you want …
“It’s a lovely place…”
We’re considering this for our IRAs (401(k)s with Fidelity for me, 457(b) 2ith WA PERS for the LHG). Where did you move your funds to?
Of course this is all a test run for the real White House objective – privatizing Social Security to Wall Street so that it can be pillaged by them. That is the ultimate aim. Where is a blue dress when you need one?
Ask Jeffrey Epstein’s friend.
The bubble for crypto is being inflated to incredible levels. Bitcoin is now at $130,000, there are Bitcoin credit cards and now Bitcoin is going to be in 401k funds. I don’t know where this will stop. But in the short term, it’s a rational investment as it’s certain to go up wildly in the next few months at least. I wonder if Bitcoin will reach 1,000,000 before it crashes. Unlike tulips, it has a committed, international, user base.
It certainly has more uses then tulips. What’s trending now is using Bitcoin as collateral and never selling it. Obv it will go down at some point but as long as you don’t get liquidated by having a low LTV you’d be fine
$4.01k update:
This is what everybody was hoping for-legitimacy of packaged air cleverly disguised as cryptos, Bitcoin in particular.
Now to come up with appropriate nicknames…
Green(screen)backs
” Everybody” ? Which “everybodies”? How many “everybodies”?
I understand the regret in missing out on not having a one-figure investment in Bitcoin, some skin in the game.
Its never too late and they’re still making 1’s & 0’s~
Which one will they run out of first?
I invested in cans of canned fish in cans. I am slowly eating them down.
If crypto crashes back to truth-value zero before I have eaten all my cans of canned fish, the fish inside the cans of canned fish that I will still have at that time will still be safely inside of their cans. So whoever might be regretting not having bought Bitco at the start, it isn’t me. I have been true to my pledge, the No Crypto pledge.
I pledge, on my honor, that I will neither use crypto nor invest in crypto. And I will not tolerate those who do.
The linked AFT/AFREF/AAUP report From Public Pensions to Private Fortunes on how Private Equity morphed from its 1980’s leveraged looting model into a fee-driven billionaire factory is well worth downloading and reading.
My only criticism of the report is that it fails to emphasize how campaign cash and outright graft have destroyed the democratic process that should have caused regulators, legislators, and fiduciary boards to rein-in this devastating looting of the commons. Trump’s proposal is nakedly transactional, like everything he does. In case the link is too deeply buried I’ll repeat it here: https://ourfinancialsecurity.org/resources/publicpensionsprivatefortunes/
The link got truncated and there have been bugs in how Comments can be edited using Safari. Full .url below.
https://ourfinancialsecurity.org/resources/publicpensionsprivatefortunes/
From the Everything is Like CALPers file:
https://www.oregonjournalismproject.org/private-equity
Oregon pension plan under-performance is hitting small communities hard.
Wait till AI hacks into the invulnerable, immutable, and unhackable crypto system. It seems, in this day and age, the latest and greatest digital invention 10 years ago, becomes obsolete with the passage of time.
Devil’s Own Advocate:
What if Bitcoin et al was the stalking horse that Wall*Street pinned the tale on, when things come a cropper?
When things come a cropper, the canned fish inside my cans of canned fish in cans will still be inside my cans of canned fish in cans.
Those who can invest in Reality and Survival should do so rather than investing in munny or sekyooriteez or stokz or bahndz or such, to the extent that they are able. Those who are only a little bit able can still invest a little bit in a little bit of Reality and Survival.
Sardines perhaps? But would they be eating sardines or trading sardines?
https://novelinvestor.com/happy-hour-trading-sardines/
Sardines are wonderful. They are low on the food chain so they accumulate least-feasible contanimants. They last for several years inside the cans so you can eat them at leisure. And the cans themselves can be saved for arts-and-crafts purposes around the home.
I must confess, I had never heard of the concept of trading sardines till now. It makes a fine apocryphal tale.
If you are speculating on trading sardines, why would you ever bother to worry about what is in the can? Till you are hungry and have to liquidate your speculative investment one can at a time. ( If some of my sardines become unfit to eat due to being held for too long before eating, they will still be fit to feed to the garden).