Trump’s Private-Equity 401(k) Ambitions Run Through Pooled Funds

Pooled Wall Street investment funds give the Trump administration an easy way to insert private equity in 401(k)s by shifting legal and investment monitoring risk to Wall Street managers eager for access to untapped assets.

White House advisers are considering a directive that would help private asset managers vie for a stake in the $12.5 trillion 401(k) market, Bloomberg News recently reported.

The private sector has already taken steps to welcome these assets into more 401(k)s. Empower, one of the nation’s largest plan administrators, tapped major firms including Apollo Global Management and Franklin Templeton this year to begin offering workers private-asset-heavy collective investment funds through employer-sponsored managed accounts.

Low-cost collective investment trusts and target-date funds would allow Trump’s Labor Department to quell plans’ concerns that integrating private equity into plans would invite lawsuits from plan participants and the retirement benefits plaintiffs’ bar.

“Pooled investments and managed accounts are really the only way to make it work in 401(k)s,” said Carol Buckmann, founder and partner at employee benefits firm Cohen & Buckmann PC.

Shifting Risks

President Donald Trump in his second term publicly embraced alternative investments like cryptocurrency and private equity. These asset classes can offer higher returns but carry risks to workers as well as plan sponsors that can be held liable in court for exposing them to underperforming funds.

“Fiduciaries making decisions on behalf of 401(k) investors are held to the standard of an expert,” said Jerry Schlichter, founding and managing partner at plaintiffs’ firm Schlichter Bogard LLC. “They have to fully understand the portfolio of investments they recommend.”

Private-equity investments are, by their very nature, private, Schlichter said. They lack the public reporting requirements commonplace in 401(k) plan documents, and investments in them can remain locked up for years.

Those risks can expose plans to fiduciary lawsuit threats from participants and beneficiaries.

But if plans introduce private equity as a feature among a suite of investments in a pooled investment vehicle like a CIT, they can shift some financial and legal risks to Wall Street brokers eager to diversify their own portfolios.

DOL Guidance

Private-equity firms have courted the Trump administration since his first term when the DOL published an information letter that established guardrails defined-contribution plans like 401(k)s could use to add unconventional investments that satisfy fiduciary oversight requirements.

“This was about fairness,” said Robert Collins, who leads US private wealth and defined contribution practices at global private-equities company Partners Group AG—one of the firms that sought the DOL’s input. “This was about giving people access to the entire economy, and not just Amazon, Microsoft, and Facebook, not just meme stocks, but the entire economy.”

The strategy the DOL endorsed was offered through carefully managed collective investment trusts that included liquidity components to handle participant withdrawals. Private-equity investments aren’t usually flexible enough to offer those who buy in the opportunity to cash out whenever they want.

Liquidity requirements are a key feature in the Employee Retirement Income Security Act. Pooled vehicles such as CITs can feature some illiquid private-equity investments because the funds are diversified among a suite of different securities, many of which can be withdrawn quickly.

“Eventually, this is likely to become a standard part of 401(k)s,” said Josh Lichtenstein, a partner at Ropes & Gray LLP in New York who specializes in retirement plan investment management.

Legal Options

CITs allow firms to market financial products that look much like the mutual funds 401(k) investors know well, while escaping traditional US Securities and Exchange Commission regulations.

That keeps costs lower for consumers, but has raised eyebrows among Democrats on Capitol Hill as lawmakers consider legislation that would make CITs the default option for more workplace retirement accounts.

Republicans, meanwhile, are coalescing around legislation that would bar the DOL from setting limits on investments like crypto or private equity. The White House could throw its support behind the bill and ax Biden-era guidance that recommended against private equity in 401(k)s. Fee disclosure rules that hamper CIT investments could also be eliminated or tamped down, benefits advisers told Bloomberg Law.

Sen. Elizabeth Warren (D-Mass.), a staunch critic of the administration’s friendly stance on alternative 401(k)s, sent Empower a letter this month blasting the company for exposing retirement investors to private-equity firms that have faced federal enforcement actions for failing to meet investor protection standards.

“Pensions’ investments in private equity have been dubbed a ‘Wall Street time bomb,’” she wrote.

Court Blessing

CITs have grown in popularity past mutual funds, accounting for 52% of the target-date fund market for the first time late last year, according to Morningstar’s 2025 Target-Date Landscape report.

Mutual funds are also pooled, but they are SEC-monitored securities that add more expensive reporting requirements.

“It’s one of the easiest decisions a plan sponsor can make,” said Janet Yang Rohr, Morningstar’s director of multi-asset and alternative strategies. “Costs are low and professionals are making decisions.”

Plan sponsors that are interested in allowing their workers to access private equity caught a break in May when the US Court of Appeals for the Ninth Circuit dismissed a participant lawsuit against Intel Corp. that claimed it violated its fiduciary duty of prudence by balancing its stock- and bond-heavy CITs with private equity investments.

Alternative assets tend to trend upward during a recessionary market, said Buckmann.

“Private equity is something you have to navigate carefully, but the court found that there was a way to do it through carefully managed pooled funds,” she said. “For now, that’s the direction to go.”