The push to bring alternative investments into 401(k) plans “is quickly becoming the most dynamic and complicated topic in the financial services space,” said Gina Alsdorf, an attorney with Carlton Fields.
Alsdorf and another Carlton Fields attorneys discussed what financial professionals need to know about including alternative investments in clients’ retirement plans during a recent webinar by the National Association for Fixed Annuities.
In August 2025, President Donald Trump signed an executive order seeking to democratize access to alternative assets for retirement planning through 401(k) programs. As a result, financial professionals may be uncertain about their duties given the various standards for advice and retail sales across the marketplace.
“Over the last year, we’ve seen a meaningful shift in policy – most notably, the 2025 executive order focused on democratizing access to private markets,” Alsdorf said. “That’s a big idea because for decades, alternative assets in investments have largely been the domain of institutional investors, and now we’re asking the question: What happens when those same strategies start moving to participants and individual investors?”
Alternative assets are defined as:
- Private market investments, including direct and indirect interests in equity, debt or other financial instruments that are not traded on public markets.
- Direct and indirect interests in real estate, including debt instruments secured by direct or indirect interests in real estate.
- Holdings in actively managed investment vehicles that invest in digital assets.
- Direct and indirect investments in commodities.
- Direct and indirect interests in projects financing infrastructure development.
- Lifetime income investment strategies, including longevity risk-sharing pools.
Alsdorf said 401(k) plan fiduciaries have not included private investment options in the past because of worries around fiduciary duties and other potential issues with many private investments. However, she added, most defined benefit pension plans have had some investment in private investments.
In addition, retail investors have been subject to rules about investing in unregistered securities, such as private equity, because of these investments’ complexity. As a result, private investment options were limited to investors who met specific financial requirements. Those investors include certain high net worth individuals, banks, insurance companies, brokers and trusts.
Potential complications in private investment
Private investment options have several potential complications, said Carol McClarnon, attorney with Carlton Fields.
- Valuation: Market value may generally be defined as the selling price of an asset in an arm’s length transaction, based on the amount a willing buyer will pay and a willing seller will accept. Unique or hard-to-value assets are those that are not actively traded, have a subjective valuation and have values that can only be estimated. Value is determined by general partners, valuation committees, independent valuation firms and fund administrators.
- Liquidity: Alternative investments are usually less liquid than publicly traded funds. In addition, alternative investments often have redemption and liquidity restrictions. Retirement plans need liquidity for participation distributions and expense payments.
- Complexity and transparency: Investments can be complex. They can involve layered fees, and those fees can be high, depending on the investment.
- Risk and volatility: Risks may be difficult to understand. Some alternative investments, such as cryptocurrencies, are highly volatile. Investors may have a limited ability to exit if the investment is not going well.
“The question is, can our governance keep up with where the products are going?” McClarnon asked.
New product development
Alsdorf said the industry is developing products that attempt to deal with some of the potential issues surrounding private investment. They include:
- A fixed indexed annuity that is indexed to crypto. This FIA may solve some volatility and risk issues, she said, but gives only some of the upside potential.
- Collective investment trusts that include alternative assets.
- Managed accounts
- Closed end funds, which provide retail access to alternative assets.
Collective investment trusts is one area in which product development in the retirement space is occurring, McClarnon said. A CIT is a pooled investment vehicle that looks similar to a mutual fund. Only specified types of retirement plans may invest in CITs, due to tax rules and securities exemptions. Assets are held in trust and the plan enters into a participation agreement. CITs are regulated by banking laws instead of securities law.
Examples of CIT products include lifetime income products – such as an annuity contract issued to the trust. Products with private equity/private debt components also are being introduced.
© Entire contents copyright 2026 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.
