Private equity wants a piece of your 401(k) — and hopes Trump can make it happen
Private equity firms are hoping the new Trump administration makes it easier for them to access something they’ve long wanted: your 401(k).
Wall Street investment giants view Main Street retirement savings as a way to fuel demand for unlisted illiquid bets that aren’t traded on any public exchange.
Such investments include real estate funds, private loans and leveraged buyouts of companies.
Typically, private equity firms such as Apollo (APO:), Blackstone (BX:), and KKR (KKR:) to raise 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’ve long wanted to get hold of is the more than $12 trillion currently sitting in defined investment plans that workers rely on for their retirement nest eggs, such as 401(k)s.
Closing: January 8th at 4:00:02 PM EST
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The Biden administration has not embraced that idea, but industry watchers expect that to change during Donald Trump’s second term, which is expected to broadly loosen regulations affecting the financial services world.
“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 American Investment Council, a private equity lobbying group.
The argument for such a shift is that private equity funds can give everyday investors more diversification away from public markets and generate higher returns in return. some illiquidity.
Read more. How much should I contribute to my 401(k)?
The reasoning aligns with broader concerns many investors have about the current stock market’s historically high valuations and the concentration of Big Tech stocks among the top 10 companies in the S&P 500 index (^GSPCall but Berkshire Hathaway (BRK-A, BRK-B) are technological giants. Together, those 10 make up 37% of the index.
Apollo CEO Mark Rowan argues that too many investors are relying on the performance of too few public companies.
“If we get access through broad 401(k) reform or regulatory change or regulatory incentives, I think that’s going to be positive not only for us but for the entire industry,” Rowan told analysts in November.
Today, both private and public assets come with risks and rewards, Rowan told Yahoo Finance later this month, with more companies opting to go private than public.
“The biggest trend in our industry is that investors, individual investors and institutional investors, are looking at their fixed income bucket and saying to themselves, ‘Why is this 100% public?’
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