Alternative investments have been around for a long time, but for years they were mostly limited to wealthy individuals and big institutions that could afford to buy in. They weren’t really an option for the average person saving through a workplace retirement plan. But as cryptocurrency has exploded in popularity, more everyday investors have started looking into these types of higher-risk, potentially higher-reward opportunities.  

I mean, who isn’t looking for a higher return on their retirement investment? On August 7, 2025, President Trump issued an executive order—Democratizing Access to Alternative Assets for 401(k) Investors—which directs that 401(k) plans be permitted to offer alternative investments, like private market investments and digital assets, among their other offerings.  

In response, the Department of Labor (DOL) issued guidance about including private equity in target-date funds. Doing so may be permissible, the agency says, within a diversified fund managed by a professional investment manager—as long as fiduciaries evaluate the investment under ERISA’s prudence and loyalty standards.  

So, what’s different, and what do you need to know? Read on.

The August 7 executive order defines alternative investments as falling into these categories:  

Historically, regulators have been hesitant to include these investments in employer sponsored plans, but that’s likely to change. The order directs federal agencies to reduce regulatory and legal barriers that have historically limited access to alternative investments in 401(k) and other defined contribution plans.  

The idea behind the shift (you might say “Democratizing” in the order name is a giveaway) is that not just the well-off, but also the average investor, should have access to these potentially higher return options that could boost their retirement savings. Historically viewed as niche options, alternative investments have been the playground of those who could more easily bear the risk.  

Retirement accounts are the largest investment pool for most people and the primary source for income in retirement. Given this, it’s no surprise that fund providers would seek to tap into this $13 trillion market. 

The draw of alternative investments comes from their potential to boost long-term results for retirement savers. They represent opportunities not generally available to the broad public—the current equivalent of investing in, say, Netflix before it went public.  

Historically, these investments have shown strong returns over long periods of time, but they are not without risk. The biggest? Liquidity, as in alternative options just don’t have it. Investments in private companies or infrastructure projects are hard to sell out of quickly, and that’s not a great match for a retirement account that values flexibility, simplicity, and easy access—especially for participants nearing retirement or changing jobs and rolling over their old accounts.

A few more of the downsides to including these investments in 401(k) accounts:  

Even with these drawbacks, alternative investments add diversification while potentially increasing returns and hold a lot of appeal for investors over a long timeframe, which is why advocates have pushed to include them in retirement plans.

Investing doesn’t come with any guarantees, and what’s high-risk today might not be tomorrow—or 20 years from now. The August 7 executive order shifts a May DOL guidance that cautioned “extreme care” before including crypto as an investment option. What tomorrow or the year ahead may hold is anybody’s guess. Employees need to understand that the relatively safe 401(k) they’re counting on does carry its own risk and shifts in the political and economic climate may amplify them.   

Change is inevitable, and this topic is likely to stay at the forefront of the political landscape while guidance whipsaws between advocates and detractors. As I write this, the DOL has issued new guidance allowing for private equity to be included within target-date funds, as long as they’re part of a diversified fund overseen by a professional investment manager and fiduciaries evaluate the fund under ERISA prudence and loyalty standards.   

Of course, the potential for higher returns is attractive, but there’s a lot to consider before adding these options to your organization’s retirement plan. As fiduciaries, you need to ensure you have the right oversight of your providers and decide whether the added investment risk is appropriate for your employees.  

Your plan serves everyone in your organization, which means being an early adopter might not be the right move for you today. These investments are worth watching, however, and reconsidering as guidelines—and your needs—evolve. Have questions? We would love to hear from you. Feel free to reach out.