President Trump signed an executive order on Aug. 7 that directs the Department of Labor (DOL) to review and clarify fiduciary guidance around offering alternatives assets in defined contribution (DC) plans.

Background of the Executive Order on Alts in DC Plans

Institutional investors, including defined benefit plans, foundations, and endowments, often allocate to alternatives investments within the private markets to diversify their exposures to public markets investments. Among DC plans, private markets investments have not traditionally been offered given factors such as liquidity, transparency, fees, valuation, and the litigious nature of the DC landscape.

Recently, several alternatives asset managers have launched or announced plans to launch investment vehicles specifically designed to be used within a multi-asset framework (e.g., as part of a target date fund series or a managed account portfolio). Assets in DC plans were $12.5 trillion at year-end 2024, according to the Investment Company Institute.

Notably, the order lists the following as alternatives assets:

• Private markets investments, including private equity and private credit
• Direct and indirect real estate investments
• Actively managed investment vehicles holding digital assets (e.g., cryptocurrencies)
• Direct and indirect commodities investments
• Direct and indirect investments in infrastructure projects
• Lifetime income investment strategies

In addition to instructing the DOL to review and clarify fiduciary guidance within 180 days of its issuance, the executive order directs:

• The DOL “to clarify the Department of Labor’s position on alternative assets and the appropriate fiduciary process associated with offering asset allocation funds containing investments in alternative assets under ERISA.”
• The DOL to “propose rules, regulations, or guidance, as the Secretary deems appropriate, that clarify the duties that a fiduciary owes to plan participants under ERISA when deciding whether to make available to plan participants an asset allocation fund that includes investments in alternative assets, which rules, regulations, and guidance may include appropriately calibrated safe harbors.”
• The DOL to work with the Treasury Department and the Securities and Exchange Commission (SEC) to facilitate the objectives of the order.
• The SEC to “consider ways to facilitate access to investments in alternative assets” by DC plan participants.

In June 2020, the DOL under the first Trump administration published an information letter stating that the inclusion of private equity within a multi-asset framework is not strictly prohibited, but plan fiduciaries must adhere to the same standards and weigh the same considerations they would for other asset classes. In December 2021, the DOL under the Biden administration issued a supplemental statement, which was perceived to mark a shift in tone from the information letter. The executive order directs the DOL to consider rescinding the 2021 supplemental statement.

Bottom Line

The executive order is directional, meaning impacted parties will need to wait for final rules, regulations, and/or guidance to be issued. For plan fiduciaries, establishing and following a sound fiduciary process for the selection and monitoring of any investment option remains paramount.