Yesterday by executive order the President expanded the assets permitted in your 401k retirement plan.  Prior regulation restricted retirement investments to, in effect, traditional securities and related investments, presumably on the assumption that they were safer, more transparent and less volatile than the investment classes just approved.

This development is not surprising; for the current Administration Crypto is like owning money, and volatility just part of life; indeed, given volatility of equities the past seven months, that latter perception appears correct.  And if a person has knowledge of Crypto, let’s say does not look confused when someone suggests they should obtain a liquid staking receipt token, why not?  There may be risk that some retirees will chase the Crypto  without understanding risks, but then again many folks invest in traditional securities without a true understanding of what they are doing there, either.

Private equity investment has proven lucrative for professional investors but, in it own way, is likely an even more risky asset than any other.  There is no track record or objective current valuation for making a PE investment, and new enterprise disclosures by companies in which investment is sought often leave much to be desired.  On the other hand, more liberal funding of new enterprises may give a boost to US entrepreneurship, and today that is needed as the rate of professional investment in start-ups is lagging midst various market uncertainties we need not repeat here.

One safeguard to investors in these newly permitted asset classes would be for such investments to be made through funds run by area professionals, such that no investor need rely on their own imperfect knowledge; such bundling is indeed specifically referenced in the executive order. The Department of Labor (interested in employee retirement safety) and the SEC are admonished to work on appropriate detailed regulation.

Finally, this action may ultimately drive revision to the current rules for making investments in private companies; the requirement of having some liquidity or sophistication now required to reach the level of accredited investor and to make many types of PE investments may have to be softened.

Note: Senator Liz Warren in scathing critique noted that this action provides PE billionaires with “their biggest wish; access to retirement savings.”  Duly noted.