The private equity industry is urging incoming President Donald Trump to allow access to broader pools of capital previously unavailable to them, including retirement savings, in a move that could free up trillions of dollars for companies. Preparations are underway to lobby the Trump administration.
The $13 trillion industry hopes the new White House will restore regulatory relief from the final months of President Donald Trump’s era, which allowed professionally managed funds to include private equity investments. I am doing it.
Now, the industry is moving past that first step and allowing tax-deferred defined contribution plans such as 401k’s to support private investments such as leveraged buyouts, low-grade private loans, and illiquid real estate deals. , industry executives told the Financial Times.
Executives say the initiative will help the high-fee funds attract investors with at least as much wealth as the sovereign wealth funds, pensions and endowments that have traditionally supported the world’s largest groups such as Blackstone and Apollo Global. He said there may be an opportunity to win. And KKR.
Private equity and non-traded real estate funds are typically restricted to institutional investors or wealthy individuals because they often have higher leverage, less liquidity, and less disclosure than traditional mutual funds or exchange-traded funds. It has been. They also typically have high fees and performance metrics that are difficult to evaluate.
“We’re going to explore opportunities for average investors to diversify their portfolios and have the same access to private funds as wealthy people, if they want to,” said one Washington lobbyist. “There are 4,000 publicly traded companies[in the U.S.]. Most people invest in the market through those companies, but there are 25 million private companies out there.”
Industry executives told the Financial Times that the push for deregulation is akin to a “doubling of demand” for various funds in the private capital industry.
Apollo CEO Mark Rowan said the trillions of dollars in assets held in U.S. 401k plans are an opportunity for the industry. He expressed concern about the concentration in index funds owned by retirement savers and questioned whether such investors should be limited to funds that provide daily liquidity.
“I sometimes joke, but we used all of America’s retirements for Nvidia’s performance. That doesn’t seem wise. We’re going to fix this, and we’re fixing it now.” Rowan spoke at an Apollo event this fall. “In the United States, we have $12 trillion to $13 trillion of money in 401k plans. What are they investing in? For 50 years, they have invested in highly liquid indexes, primarily the S&P 500. We invest in the fund every day. We don’t know why.”
Wealthy investors are flocking to private real estate and loan funds managed by Blackstone, Apollo, HPS, Owl Rock and others, seeking higher yields and diversification into companies unavailable to public market investors. A record $120 billion flowed into such funds in 2024, according to private fund data expert Robert A. Stanger & Company.
But some private equity industry executives worry that retirement savers will no longer be able to distinguish between trustworthy funds and those who jump in to chase high fees. There is. They recommend that private investments should be directed by trustees rather than individuals selecting funds directly themselves.
The window for deregulation was opened in the late stages of the first Trump administration by Eugene Scalia, son of the late Supreme Court Justice Antonin Scalia. Scalia’s agency, then Labor Secretary, issued an information letter in June 2020 recognizing private equity investments as part of retirement holdings, such as target-date funds and balanced funds. did.
“Adding private equity investments to these professionally managed investment funds will expand the range of investment opportunities available to 401(k)-type plan options,” the department said at the time. Ta.
The idea was supported by then-Securities and Exchange Commission Chairman Jay Clayton, who joined Apollo’s board after leaving office.
Lobbyists and private capital groups are studying how Scalia’s efforts can be advanced into large-scale independent investments. Scalia, who joined law firm Gibson Dunn after Trump took office, successfully challenged President Joe Biden’s administration’s efforts to tighten disclosure and regulation of private market funds.
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“We are committed to creating a pro-growth regulatory system that supports small businesses and provides more opportunities for everyday investors,” said Drew Maloney, president of the American Investment Council, the private capital industry’s main lobbying group in Washington. “I will insist on that.”
PE executives believe the incoming administration will be less hostile to private transactions, which were a central target of Biden’s antitrust authorities.
“We remain fully committed to working with the Trump administration,” Maloney said.
