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President Trump yesterday got the ball rolling on allowing alternative assets in 401(k)s and other employee retirement plans.
The executive order, signed Thursday afternoon, directs the Labor Department to “reexamine” its guidance on fiduciary responsibilities around alternative assets. This includes real estate, private equity and cryptocurrencies.
The Labor Department is also tasked with working with the SEC and other federal agencies to evaluate regulations and determine which changes should be made.
“Burdensome lawsuits that seek to challenge reasonable decisions by loyal, regulated fiduciaries, and stifling Department of Labor guidance issued since my first term, however, have denied millions of Americans opportunities to benefit from investment in alternative assets,” Trump wrote in Thursday’s order.
“Such assets are an increasingly large portion of the portfolios of public pension and defined-benefit retirement plans and offer competitive returns along with diversification opportunities.”
Reports that Trump was due to sign the order started circling hours before he actually put pen to paper, so investors (crypto, mostly) began trading the news well in advance.
Bitcoin, as expected, rose on the news, gaining close to 3% Thursday before paring gains on Friday. As of 2 p.m. ET, BTC was trading 0.6% lower over 24 hours. ETH gained as much at 6% yesterday and was still in the green today, trading 3% higher over the day at 2 p.m. ET.
Hedge funds and PE firms were also excited about the executive order, which kickstarts a regulatory change many of them have been seeking for years.
The federal agencies have 180 days to complete their evaluations and give recommendations. Should new regulations be proposed, the process of writing, soliciting public comment and finalizing rules will likely take several months.
401(k) and other account providers will also have to get on board. Even if alternative assets get the official green light, brokerages aren’t required to offer it. We saw something similar with bitcoin ETFs, which are still unavailable for trading on some major platforms, including Vanguard.
And, even if providers do want to offer alternative assets, creating the infrastructure and clearing legal and compliance hurdles is going to be expensive and time-consuming.
Speaking of Vanguard, I will mention that the asset manager told ABC news yesterday that some alternative investments offer diversification and high return potential for investors, but education is crucial.
In a separate executive order on Thursday, Trump took aim at banks, directing federal regulators to crack down on institutions that “discriminate against customers and businesses” based on political beliefs.
