Alternative Assets in Defined Contribution Plans

Growth in alternative asset categories continues to climb. According to a study by Preqin, alternative assets registered $18.2 trillion at the end of 2024 and are forecasted to exceed $29 trillion by the end of 2029.

Interest in alternative assets has expanded along with this growth in recent years, as more retail investors seek the same benefits that have accrued to institutional investors. The investment industry has responded to this demand by improving access to alternatives, via lower minimums and different vehicles (liquid products such as mutual funds as well as semi-liquid products such as interval funds) to meet the needs of a wide range of investors.

Now, this trend of increasing access is expanding into the defined contribution 401(k) realm.

Adding Alternative Investments to 401(k) Plans

On August 7, 2025, President Trump signed an executive order titled “Democratizing Access to Alternative Assets for 401(k) Investors.” The objective is to expand access to alternative assets to the 90 million individuals who participate in employer-sponsored 401(k) plans. The executive order does not have the force of law. Instead, it directs the Department of Labor (DOL), the Securities and Exchange Commission (SEC), and other federal agencies to re-examine the existing regulations that have thus far limited access to alternative assets in 401(k) plans.

Key directives of the executive order include:

• Requiring the DOL to examine existing guidelines on fiduciary responsibilities when considering alternative assets.
• Requiring the DOL, in concert with other federal agencies, to identify what criteria plan fiduciaries should take into account when trying to balance the higher expenses of alternative assets with long-term performance and diversification benefits.
• Directing federal agencies to collaborate to align regulatory changes.
• Emphasizing reducing Employee Retirement Income Security Act (ERISA) litigation that “constrains fiduciaries’ ability to apply their best judgement in offering investment opportunities to relevant participants.”

The executive order provides further momentum for consideration of alternative assets in 401(k) plans and more closely aligns them with defined benefit (pension) plans with respect to such assets. One important aspect of the executive order is the mention that exposure to alternative assets should be via allocations in professionally managed portfolios (e.g. target date funds, managed accounts, etc.), and not as a standalone option plan participants could select.

The executive order adds further complexity for plan sponsors as they seek to adhere to their fiduciary responsibilities under ERISA. This is an opportunity for plan sponsors to consider alternative assets; it is not a mandate to include them as part of an investment menu line-up. We believe utilizing professionally managed portfolios to gain exposure to alternative assets may be a prudent approach, should a plan sponsor determine this is a path they would like to pursue.

As with all aspects of ERISA, plan sponsors should develop, maintain, and document a prudent process when considering any investment menu line-up or plan design changes. We strongly recommend that plan sponsors leverage an experienced qualified plan advisor like Johnson Financial Group to ensure they are meeting and adhering to their fiduciary responsibilities. Doing so helps mitigate potential liability issues, allowing plan sponsors to focus on running their business.

A message from Advisor Perspectives and VettaFi: Discover something new! Click here to register for our upcoming webcasts.

About the Author

Joe Guerin, CFA® is a VP Wealth Portfolio Manager at Johnson Financial Group. As Vice President, Wealth Portfolio Manager, Joe is dedicated to constructing personalized portfolios for individuals and corporate clients. With a specialization in the 401(k) market, he leads the Retirement Plan Services Investment Strategy Group, driving best practices, identifying innovative investment solutions and enhancing retirement outcomes.

Legal disclaimer

This information is for educational and illustrative purposes only and should not be used or construed as financial advice, an offer to sell, a solicitation, an offer to buy or a recommendation for any security. Opinions expressed herein are as of the date of this report and do not necessarily represent the views of Johnson Financial Group and/or its affiliates. Johnson Financial Group and/or its affiliates may issue reports or have opinions that are inconsistent with this report. Johnson Financial Group and/or its affiliates do not warrant the accuracy or completeness of information contained herein. Such information is subject to change without notice and is not intended to influence your investment decisions. Johnson Financial Group and/or its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared. Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Asset allocation and diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. Certain investments, like real estate, equity investments and fixed income securities, carry a certain degree of risk and may not be suitable for all investors. An investor could lose all or a substantial amount of his or her investment. Johnson Financial Group is the parent company of Johnson Bank and Johnson Wealth Inc. NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE

© Johnson Financial Group

Read more commentaries by Johnson Financial Group