Private equity wants a piece of the 401(k) — and hopes Trump can make it happen

Private equity firms are hoping the new Trump administration will make it easier for them to access something they’ve always wanted: a 401(k).

Wall Street investment giants are looking at Main Street retirement savings as a way to boost demand for illiquid, unlisted bets that are not traded on any public exchange.

These investments include real estate funds, private credit, and leveraged buyouts.

Typically, private equity firms such as Apollo (APO), Blackstone (BX), and KKR (KKR) Pooling money from high-net-worth individuals and institutional investors such as endowments and public pensions to make these bets. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

What they have long wanted to exploit is the more than $12 trillion currently in defined contribution plans that workers rely on for retirement funds, such as 401(k)s.

The Biden administration did not accept this idea, but industry observers expect that to change under Donald Trump’s second term. It is expected to broadly ease regulations affecting the world of financial services.

“We will advocate for a pro-growth regulatory regime that supports small businesses and provides more opportunities for everyday investors,” said Drew Maloney, president and CEO of the US Investment Council, a private equity lobbying group.

The argument for such a change is that private equity funds can give ordinary investors more diversification away from public markets and opportunities for greater returns – versus Some illiquidity.

Read more: How much should I contribute to my 401(k)?

This reasoning is consistent with broader concerns many investors have about the current stock market’s historically high valuation and the concentration of Big Tech stocks. Among the top 10 companies in the S&P 500 index (^ GSBC), all except Berkshire Hathaway (brk-a, BRK-B) They are technology giants. Together, these ten represent 37% of the index.

Too many investors rely on the performance of too few public companies, said Mark Rowan, Apollo’s CEO.

“If we can get to the 401(k) through broad reform or regulatory change or regulatory encouragement, I think that would be an upside not just for us but for the entire industry,” Rowan told analysts in November.

Today, both private and public assets carry risks and rewards, Ruane told Yahoo Finance later that month, with more companies choosing to go private rather than public.

“The biggest trend in our industry is that investors, individual investors and institutional investors are looking at their fixed income portfolio and saying to themselves, why deploy this income 100%?”

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