Introduction
Shortly following our Legal Update regarding considerations for institutional investors investing in funds alongside retail investors, on August 7, 2025, President Trump issued an Executive Order (Order) entitled “Democratizing Access to Alternative Assets for 401(k) Investors,” signaling a fundamental shift in federal policy regarding access to asset classes previously reserved for institutional investors.
The Order instructs the Department of Labor (DOL) to reduce regulatory barriers and litigation risks that have historically limited defined-contribution plan participants’ access to alternative assets. The Order’s expansive definition of “alternative assets” encompasses both traditional private market investments including private equity, private credit, real estate, digital assets, infrastructure, and commodities, and emerging asset classes including cryptocurrency funds and longevity risk-pooling products, investment classes routinely available to public pension systems, family offices, and sovereign wealth funds.
The Order instructs the Secretary of Labor to review and update the DOL’s guidance on fiduciary responsibilities under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). This review specifically concerns the inclusion of alternative assets in asset allocation funds offered to 401(k) plan participants. The Secretary must complete this review within 180 days and coordinate with the Treasury Department and the Securities and Exchange Commission to support the policy objectives outlined in the Order.
Despite executive support for alternative asset expansion, ERISA plan fiduciaries remain subject to ERISA’s fundamental prudence and loyalty standards. The Order does not suspend fiduciary obligations but rather seeks to provide clearer regulatory pathways for satisfying them when considering investments in alternative assets.
Immediate Actions
Just five days later, on August 12, 2025, the DOL announced that it had rescinded guidance from a Biden-era 2021 Supplemental Private Equity Statement, which had narrowed the guidance provided in a 2020 DOL information letter addressing inclusion of alternative assets in asset allocation funds offered under 401(k) plans, and instead took the view that most fiduciaries would be “not likely suited to evaluate the use of PE investments in designated alternatives in individual account plans.”
In announcing the rescission of this guidance, Deputy Secretary of Labor Keith Sonderling said, “By repealing the Biden administration’s stifling guidance, we look forward to a future where innovative retirement products can deliver increased upside, diversification, and security to the American worker.”
What Comes Next
While the Order and rescission of DOL guidance demonstrate a change may be on the horizon for 401(k) plans and investors, they do not bring with them any regulatory change; further guidance and rulemaking from the DOL and SEC will clarify what comes next for fund sponsors, general partners, and their institutional investors.
Invariably, fund sponsors and general partners will begin to partner with 401(k) platforms to provide access to their funds. As a result, we expect institutional investors to have to continue exercising vigilance in negotiating their own investments alongside these investors, including by:
- working with general partners to understand how 401(k) plan capital may affect new funds they intend to subscribe to;
- reviewing governance for alignment of interests and consistency in fee structures and reporting standards;
- negotiating protections such as Most Favored Nation clauses, reporting covenants, or advisory committee seats; and
- monitoring regulatory developments to assess potential fiduciary and compliance risks associated with inclusion of 401(k) plan investors.
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